A video summary of our SA article on "The Challenges of Negotiating Merger Premiums" is now available on YouTubeRead More
In September 2016, we recommended going long the misunderstood advertising company Omnicom Group Inc if certain events took place.
The historical high correlation between OMC and the S&P500 Index made OMC a sub-optimal, high beta proxy for the SPY despite its above average ROIC & EVA.
Strategies for improving OMC's relative stock price performance included optimizing its balance sheet (principally via a material stock buyback) and implementation of a number of additional corporate governance reforms.
The good news is that since the Brexit vote in June of 2016, the OMC stock price performance has decoupled from the S&P500 Index.
The bad news is that OMC has materially underperformed the S&P500 Index during this ongoing equity bull market. We would continue to avoid OMC until internal or external reforms are implemented.Read More
A number of market commentators have drawn positive attention to the low PE multiple and high dividend yield of B&G Foods (NYSE: BGS). While we would not go so far as to call B&G Foods a value trap, the stock still carries material downside risks. In particular, the long thesis should, at a minimum, take into account the B&G Foods leverage, payout ratio and management compensation incentives.Read More
SODI adopts a poison pill under the guise of an NOL preservation plan. A useful and common negotiating tactic for company management to deal with a hostile bidder. However, in this case, SODI is a micro-cap company with a cash burn rate issue. Poison pills are not usually top of the list of management priorities. Suggesting something is afoot.Read More
New article on New Jersey Resources / South Jersey Industries merger speculation. Most likely outcome, if there is any deal at all, is a low premium merger-of-equals. A 30% premium, 50% stock / 50% cash deal is also possible but requires some transaction structuring and extensive merger due diligenceRead More
An extended version of our Seeking Alpha article on SNAP's (unanticipated?) legal and structural problemsRead More
The merciless online broker pricewar does not appear reflected in their stock prices... yetRead More
The Australian dollar has historically been highly correlated with the price of crude oil. Which might appear counterintuitive given the relatively small quantity of Australian crude oil production, and the market mantra that foreign exchange rates are all about interest rate differentials. If you understand how Australian LNG exports are priced, and how Australian LNG export contracts differ to North American LNG, then the relationship makes more sense from an empirical and theoretical basis. If this relationship between the Aussie dollar and crude oil prices continues into the future, it allows investors and speculators to reduce their emphasis on future Australian residential housing prices and/or RBA interest rate changes (provided, of course, that you have strong views on the future of crude oil prices)Read More
Interesting choice of industry sector by the co-founders of Snap Inc. So many bankrupt camera companies come to mind. Especially when they could have gone down the road of portraying itself as a social media company, or a networking company, or even a communication company. Is SNAP already waving the white flag? Or preparing for the end of the current social media stock boom?Read More
Assuming there are enough voting shareholders to meet an AGM quorum, why does the Snap Board of Directors invite the non-voting Class A shareholders? Seems like a token gesture and while the prospectus makes a big deal of the invitation it does not explain why the gesture is made.
A compelling case could be made that the best thing for non-voting SNAP shareholders would be to do away with the pretence of holding an AGM and distribute the AGM cost savings to Class A shareholders in the form of a dividend.
Twitter is often portrayed as a failed business model. If this is true, does it deserve its current trailing sales multiple of almost 5 times (!). An 80% post-IPO price decline might sound excessive but the trading multiples suggest the worst may not yet be behind us for Twitter stockholdersRead More
SA Pro Editors discuss our 2016 research report on Lannett Company and provide an update on its intrinsic value.Read More
Since our research report in May 2016, Lannett Company (LCI) continues to trade as a proxy for the deeply troubled Valeant Pharmaceuticals (VRX). Their daily stock price correlation remains above 80%. Moreover, over the same time frame, LCI has an equally high correlation (~ 75%) with the healthcare sector ETF (XLV). This suggests to us that the intrinsic value upside in the LCI stock price could be realized once the industry overhang from Trump's drug price-control tweets abates.Read More
Square Inc has appreciated 70+% since June 2016. Company insiders, especially the founder & CEO, have been consistent sellers. At these lofty forward trading multiple, either management or the equity markets have got it wrong.Read More
OMC continues to be highly correlation to the SPX. Over 80% since our report publication in September 2016. Balance Sheet and Corporate Governance reforms might be the only way to avoid the cycle of underperformance during the next equity bear market.Read More
Powerpoint summaries of our written research reports are not only a lot easier to digest, they are slowly being added to our website for free download.Read More
FGBI has experienced what might appear to be an impressive rally since our bullish research report in late 2016. However, most of the price gain can be explained by the general regional banking rally. Which suggests to us that the market still does not fully recognize the intrinsic value of FGBI. We had hoped that during a banking sector bull run that FGBI would outperform its peers. After all, it has a larger discount to intrinsic value. That has clearly not happened so patience seems to be required.Read More
Adjusting the PDLI trailing EBITDA multiple for the equity research consensus earnings estimate, and assuming a 35% tax rate, the pro forma PDLI forward EBITDA suggests it is not, in any meaningful sense of the word, a "value" stock