prophets

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  • NVIDIA's Long-Term Prospects Mean It's Currently Undervalued
    intel cant buy this company, it wont pass anti-trust review.
    Jul 25 12:46 pm |Rating: 0 0 |Link to Comment |View article
  • NVIDIA's Long-Term Prospects Mean It's Currently Undervalued
    you continue to be delusional. Intel has way more control over how PC's are designed and costed out than the PC Makers. If Intel wants to drive the logic functionality of graphics into the ground, so that it can take up more real estate in the PC silicon, then it's going to do it.

    Stop writing about NVDA, you are clueless and going to lose $.
    Jul 25 11:20 am |Rating: 0 0 |Link to Comment |View article
  • Nvidia: Intensifying Competition and Execution Challenges
    kudos to amaedict for his insightful comments. truth is that NVDA just gouged its customers for over a year while fooling wall street, meanwhile the CEO/mgmt was dumping stock like mad.

    don't forget the 'theoretical' off-b/s contingent obligation they have to pay up for an x86 license in order to compete in the entire 'platform' play. they will have to pay out serious $$$ to buy up Via Technologies if they want to live in a world with direct competition vs. Intel.

    A serious analysis of their profitability by product segment and total addressable market overtime would show that they have a permanent impairment to their margins and operating income over time. It's inevitable... unless you flatly assume that Intel and their Larrabee strategy is a total failure? I think not...
    Jul 24 17:49 pm |Rating: 0 0 |Link to Comment |View article
  • Amazon: Is 'Free Cash Flow' More Important Than Net Income?
    Valid points. I actually wasn't citing Mulford's book directly, because I'm travelling at the moment and don't actually have it handy (I work in the hedge fund business and have a degree in accounting). Mulford is one of a few preferred authors/professors, when it comes to the vagaries of accounting.

    The tricky part really is evaluating the supplier/customer relationship and who has what bargaining position over time. A possible reason why Dell's WC has reversed trend in the last 3 years might be due to their faltering market position and lack of 'power' over suppliers. If AMZN's market position becomes challenged as digital distribution of books gains populairty (and whatever else they sell -- maybe Newegg.com, Walgreens or other industry vertical players materially challenge them online), then perhaps their capacity to charge their suppliers the cost of financing their inventory expansion will ebb. Time will tell.

    In terms of approaching it from a valuation standpoint, I think I would try to think about it the way a credit analyst might look at the company. I would treat the WC advantage as a source of financing or cost of debt (your obligations to your suppliers as creditors of your business). Let's say my suppliers/creditors are giving me truly 'free financing' and while my competitors get 3%/45 day terms, I am getting 3%/90 days payment terms due to my industry position advantage (also note: I don't cover retail and haven't the foggiest what actual #s should be, tho most retailers seem to operate on lines of credit/payment terms). I would probably set the cash conversion cycle to zero days, eliminating any swings in WC and the inherent negative cash conversion cycle advantage. Then I would take whatever the average net balance is over 1 year (Accounts Payable Less Accounts Receivables) and multiple it at some rate of return -- money market or what have you. At some point, if this is a credit risk the business will wind down and you will have to pay out monies owed to your suppliers. Then all you have achieved over time is the 'free float' and use of capital provided to you by the suppliers. It's what ADP does with the wages they hold on behalf of employers before their corresponding employees cash their pay checks.... they carry the cash and manage float at money market rates.

    Perhaps the more intelligent way is to say, this is a going concern... it will not be wound down, so forget this credit risk perspective. But what I really have here is extremely cheap financing from my suppliers to expand my business. I have a line of credit that is cheap. Again bring the cash conversion days to 0, and attempt to eliminate the WC cash flow benefits from your FCF evaluation. But then drop your cost of capital in a DCF, by add the average Net Working Capital advantage to the remaining balance of debt in the cost of debt calc (at a rate that will obviously be very favorable). I can't remember if AMZN still has converts or what their cost of debt is excluding the WC advantage, but whatever it is... the cheap inventory financing will certainly lower the cost of debt and the total cost of capital, which then boosts the underlying equity value.

    Upon further reflection, I think William Kensington's approach is too much of an accountant and not enough reflection upon the economic valued benefit that AMZN is carrying in this negative working capital scenario. It needs to be valued in some way. But I do think Bill Miller and the bulls tend to over extrapolate it though... the WC advantage isn't 'structural free and clear cash flow' in the sense that AMZN sold a book for $1.00 that cost them $0.90, plain and simple. It's borrowing ahead of time and paying back later, which gets magnified as the business ramps and then trails off as it slows or they lose their market position (as seen in their seasonality).

    best regards,

    -pro
    Jul 07 12:34 pm |Rating: 0 0 |Link to Comment |View article
  • Amazon: Is 'Free Cash Flow' More Important Than Net Income?
    LTV - Look. It's likely that their negative cash conversion cycle is sustainable at some level and the cash flow (as the business grows) from WC is appropriate in a FCF calculation -- SOLELY as a reflection of revenue growth. The problem really would be on any expansion in the negative days of conversion. I would regard that as poor quality FCF because it's clear that any business cannot expand their cash conversion cycle in absolute day figures indefinitely. Even Dell (which also has a negative cash conversion cycle) hit the wall on WC gains in the last 3 years (they have seen a cash outflow on WC even as revenue grew), so it can be a bit dangerous to extrapolate these things too far. Other than that, I would encourage you to learn more about cash flow, read Charles Mulford's book on distorting cash flow figures. "Cash is cash is cash" is not always the case. There are many ways to overstate cash flow as seen in Harley Davidson, Bungee and other companies.
    Jul 07 07:52 am |Rating: 0 0 |Link to Comment |View article
  • Amazon: Is 'Free Cash Flow' More Important Than Net Income?
    it is poor FCF quality and bill is right.
    - the 'free float' advantage should be awarded a money market interest rate and valued as a separate financial asset.
    - it should not be included as a cash flow from operations.

    the problem with shorting AMZN is when does the market recognize this phenomenon is bogus? probably when the growth slows and the working capital advantage ceases. when does that happen? no one knows, not goldman, not bill not even AMZN itself...
    Jul 04 17:40 pm |Rating: 0 0 |Link to Comment |View article
  • Getting the U.S. Back on Track
    How does this article offer any unique thoughtful whatsoever? Things are tough now for the US and it will take hard work to dig out of a problem? What the hell kind of insight is that?

    Thanks for the wake up call Roger (or should I say Captain Obvious), I think the ABX, the yield curve, the fed policy statements (to a degree) and about 1,000+ other articles have already stated the above.
    Dec 28 11:22 am |Rating: 0 0 |Link to Comment |View article
  • Jarden Remains a Compelling Short
    Interesting note, but not necessarily a compelling short idea.

    1. ROIC sucks and they are clearly bad allocators of capital, but it's not exactly like the market is ignoring this fact. The market price trades at a discount to the capital invested.

    2. Your own pro-forma figures seem to indicate they are not going to see a bankruptcy. I agree with your own point about tangible book value being less important. They don't seem to have much capex requirements. What are the WC requirements then? With double digit EBITDA margins... I don't see how this stock at ~10x earnings is materially mispriced without a definitive viewpoint on deteriorating margins (due to competition or w/e), which you don't seem to indicate.

    Maybe they do hit the wall due to margins/consumer slowdown - if so how do you reach that conclusion. The analysis/argument does seem incomplete w/o a liquidity analysis that might make it more compelling (as suggested by a prior post).

    Interesting facts, but not a compelling argument as to whether this security is truly overvalued.

    -pro
    Dec 20 05:56 am |Rating: 0 0 |Link to Comment |View article

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