Tuesday, April 22, 2014

Two Points About Japan

You never hear about Japanese investment geniuses, and for the longest time you didn't hear much about Japanese stock markets - until Abenomics coincided with (didn't cause) the recent Nikkei rally.

The effect of Japan central bank operations is wild, unpredictable stock market gyrations that have absolutely no effect on the slow decline of the entire JGB yield curve to zero.

It's impossible to predict those gyrations, so someone running a hedge fund with 200% leverage would get ground to dust.

Public Companies Where CDS Protection Costs More Than 10% Annually

CZR, JCP, RSH, SHLD

Playing With Stock Screener

Public companies incorporated in the United States, no operations in Asia/Pacific: 22,225
Market capitalization between 5 million and 100 million: 3,223
Retained earnings greater than zero: 618
Insider ownership greater than 10%: 365
EV/EBITDA(ltm) between 1x and 6x: 63
Trading at less than 1.5x tangible book value: 43

Sunday, April 20, 2014

Thursday, April 17, 2014

Radio Shack Fun Facts $RSH

  • The Shack turns over inventory about 4.3 times per year. There's about $180,000 of inventory (cords and widgets?) per store. By comparison, Best Buy turns over inventory close to 8 times per year.
  • Best Buy sales are $300k/employee, Shack sales are $125k/employee. 
  • So, Shack takes almost twice as long and 2.4x as many employees to sell a dollar of inventory.
  • The Shack's gross margin is 34% versus Best Buy's 23%. However, Best Buy's SG&A is 20 cents per dollar of revenue and RSH's is 41 cents
  • I think these are both terrible businesses, by the way, that will be made extinct by Amazon, Walmart, and Target. However, Best Buy has no net debt and positive EBITDA. Best Buy will give a eulogy at the RSH funeral.
  • "hhgregg", a smaller Eastern retailer with less sales than the Shack is profitable (tiny margins) and turns its inventory 8x per year, with a gross margin of 29% that is almost as good as the Shack.
  • $10 million daily sales for RSH corp is only about $2,500 per store! You can probably be in the store manager hall of fame by selling $25,000 of product over a 3 day weekend. In other words, these stores are doing about $900k a year revenue. "Hhgregg" has sales per store of almost $11 million.
  • The Shack had a billion dollar market cap at the beginning of 2012! They paid 25 cents in dividends that year! They should have raised cash. Why is a company with no viable business model using debt financing?
  • "This proposed store closure program is expected to preserve liquidity by avoiding operating losses and generating cash by liquidating inventory in those stores. This will be partially offset by lease termination payments and liquidation costs."

Breakdown of Radio Shack SG&A Expense $RSH

SG&A total is 41% of revenue. That is 17% compensation, 7.3% rent, 5% advertising, and 11% "other".

CFO power move: completely stop advertising (when was the last time anyone saw an RSH ad??) and spend the $176 million (or whatever is budgeted for 2014) on buying back debt at 40 cents on the dollar!