Monday's piece questioning whether Cramer really said what I heard him say prompted this response from him:Perhaps I misspoke. Or perhaps Herb Greenberg misheard me. But I have never in my life believed you should "forget the fundamentals" when it comes to Herbalife HLFor Green Mountain GMCR. Because what I meant to say, or did say, frankly, is that all that matters is the fundamentals and they simply aren't as bad as the short sellers think they are.1 - Herbalife is a company that sells a product that you may or may not care for, in a way that you may or may not care for, with a point system you may or may not care for.
The company trades like its former self, but for how long?
How the company got caught flat-footed.
At some point in time a rollup -- companies that grow by acquisition -- can't keep up the pace of acquisitions. It happens to the best of them and when it does you get what I like to call The Reset. That's what appears to be happening to Nuance Communications, the voice-recognition company and one of the the longest-running of all rollups. And like many rollups, when the acquisitions stop, so does the growth. Or put another way, the businesses it acquired aren't growing, either. Last quarter revenue growth at Nuance barely budged ahead at 1%. That compares with 8.8% the prior quarter and 27.7% the year before.Worse, strip out more recent acquisitions organic growth tumbled by 9%. And, for what I believe is the first time, it was negative for each of the company's four segments. And suggesting the commoditization of speech recognition, Nuance turned in an operating margin of just 2.6%, roughly half that of the quarter before and a fraction of the 12.8% a year earlier.
Sitting there watching Jim Cramer at 36,000 feet Friday morning, on my way back to San Diego from New York, it was a good thing I was buckled in. The turbulence in my head, sparked by what he said, was greater than the turbulence we were flying through.What he said in a rapid-fire segment on CNBC's Squawk on the Street (and I'm paraphrasing): Forget the fundamentals, the crummy earnings quality, the business model concerns -- all of that kind of stuff short-sellers talk about. All that really matters is that "Green Mountain is selling Keurigs" and that "Herbalife is generating cash flow" and that the "hedge funds short it are only talking their books, so best to ignore them." He didn't mention my name, but by mentioning those two companies, and by pronouncing the "H" in Herbalife, he might as well have -- especially since I have written and commented critically about both and since he and I had gone back-and-forth earlier in the morning via email about Green Mountain.
Little known fact: When I was first writing the "Herb on TheStreet" column for TheStreet in 1998 Dow Jones protested. They claimed it was a rip-off of Heard on TheStreet. TheStreet fought back with a simple argument: My name is Herb and I write for the Street. Which gets us to where we are today: The formal return of Herb on TheStreet at TheStreet.This is where you'll find pretty much everything I do in 140 characters or more. Below this piece is pretty much everything I've written since I rejoined TheStreet. Above - everything new. Once the Reality Check newsletter starts, you'll also find light versions of what appear in the newsletter. It'll be a juggle that will evolve. You can subscribe through an RSS Feed or, if you prefer to have it pushed to your email, simply email me at firstname.lastname@example.org and we'll add you to the list. As always, I welcome your comments, criticisms, observations, tips and ideas.
In this excerpt from Thursday morning's Columnist Conversation on RealMoney, Jim Cramer and Herb Greenberg battled over investing in GMCR.
Confession: I had never heard of Voxeljet, the 3-D printing company, until yesterday. That's when the stock collapsed after Citron Research wrote a scathing report. Voxeljet's crash landing pulled down the other 3-D printing companies in classic knee-jerk fashion. Could they all bounce back? Today all but Voxeljet did.In the end, as even Green Mountain shows today, in this market it's more about the story than the substance. Make no mistake about it: 3-D printing is real and will likely revolutionize manufacturing as we know it today. Who knows, maybe soon the 3-D printing and Green Mountain stories will morph to Green Mountain using 3-D printers to create its K-Cups. Then there's Tesla. No talk of 3-D created Tesla cars, yet, but no dispute that the Tesla is a really cool car that has already turned the auto world on its head. But any of these companies really worth what they're trading at? Of course not. Certainly not now.
One of the most dangerous games on Wall Street is to follow insiders. Just because they sell doesn't mean you should sell. The same goes for when they buy. The key, as George Muzea of Muzea Insider Consulting, likes to point out, is following smart insiders -- that is, those with a record of buying and selling before the stock goes up and down.Which gets us to MercadoLibre, the Amazon and eBay of such countries as Venezuela, Argentina and Brazil. In September I wrote a piece headlined, "Warning Bells at MercadoLibre."A key part of the story outlined currency-related accounting and other issues cited by Marc Roberts of Off Wall Street Research, but also included this: "At least one informed company insider, CEO Marcos Galperin, doesn't appear to be taking any chances. On Aug. 8 he sold 293,338 shares at $124.26 a share. This was his first sale in well over a year, and it represents 39% of his direct stock holdings".
In a Real Money piece yesterday Jim Cramer argues that, in Twitter's initial public offering, there were more investors than flippers. (He took a swipe at Barry Diller, who earlier this week said just the opposite.) Cramer writes, "I fear most that Twitter shares will get hammered again, and that you will proceed to sell."To which I say: A good shellacking would be a good thing for Twitter -- because, as Facebook has shown, such a move would reset the stock clock to real-world time. Real-world time takes out all of the fluff and lets the company go about its business without any heavy focus on the stock. The worst thing for a hot new issue is for it to reflect anything short of perfection, because then it risks the public humiliation of a stock-market spanking -- and an even-worse risk of getting viewed as damaged goods.