Wednesday, January 13, 2010
Have Wall Street Analysts been lulled by the recent rally into expecting good earnings reports from every retailer? There is simply no other explanation for the pounding the market has given Cache. OK, sure, I own it. So what. Maybe you should too. (Important Caveat: This Blog is for Entertainment Purposes Only!). This boring women's apparel retailer has the one thing I love in a retail stock: No Expectations. There is also no fashion story, no margin story (oh, really?), no growth story. Hmmm. Why do I like it? Cache is in the midst of a cost reduction effort that is simply a matter of doing what best-of-class retailers already do: Put people in place in source countries to reduce mark ups from wholesalers and turn a variable cost into a fixed cost. If successful, operating margin should improve by several hundred basis points, which from this low level, is nearly a double. With no debt and several bucks a share in cash, there starts to be some kind of story there once the margins start improving. That's why i'm in now! Once the margin gain shows up in a news release, that's the Pavolovian signal for sell side research to jump into action, and it will be too late for me. But to sell it down 8% because of a shortfall in earnings at Christmas -- note: at least they had Earnings! -- seems short sighted given what's coming.
Friday, December 18, 2009
Take Two is today getting some recognition for having among the most valuable branded franchises in all media. Thank you Carl. Can a bidding war be far behind? Come on Electronic Arts, Come On Activision -- don't you guys have any? It's an accretive deal for both of you, and your size and stable of legendary game makers may help tame the talent at TTWO. ERTS: get over it and get after it. Madden can't last forever and who has a better next gen sports franchise than 2K? I don't know why I get so worked up over this one, but I do. TTWO is worth at least the old bid from ERTS, and with game boxes growing and average user age and income rising, it's probably worth more.
Friday, December 4, 2009
OK, I guess it's somewhat understandable that when you miss your earnings numbers this bad your stock gets creamed. But Come On! Thirty Frickin' Percent! They miss the earnings number by 40c and you take them down at a pace of 8x earnings!! This isn't a lost annuity, it's a one timer! So what if management can't manage costs. So what if talent is a pain in the ass. So what if management continues to issue themselves too many shares. Video Gaming is like radio in the 20's, television in the 40's, sex in the 60's, i digress. The point is that a tiny fraction of the future time and money that will be spent in and on video games has been spent. The stock isn't just about this year's earnings, it's about having a call option on being a player in video games for years to come, and having a place at the table when the industry is about 100x bigger. TTWO is way cheaper than competitors on Enterprise Value to Sales, and don't forget the $30 per share bid by EA last year. This one isn't if, it's when..