01/13/14 - 08:48 AM EST
This SodaStream warning is just plain bad -- and there is NO syrupy sugar-coated way of getting around it. The press release starts with: "Despite achieving all-time record sales, we failed to deliver our profit targets and are disappointed in our fourth quarter performance." Boom. It continues: "These preliminary results reflect a challenging holiday selling season in the U.S...." In other words, Sodastream is now an all-in product, where nearly everybody who is going to get or give a SODA machine has done so or will. It continues: "...Several factors, mostly from the second half of the quarter that negatively impacted our gross margin. These include lower sell-in prices and higher product costs, a shift in product mix versus plan, and unfavorable changes in foreign currency exchange rates." This is stunning. In effect, the company is conceding that it has been forced to give retailer deals in hopes of making it up on volume.....READ FULL POST
01/10/14 - 01:43 PM EST
It happens all the time: Investors get blindsided and wonder why. Classic case: Five Below. This is one I've been hearing about as a disaster-in-the-making for months, but hadn't yet focused on or written about. Still, it's a good case study, and with 21% of its float sold short, it appears investors shouldn't have been surprised by its earnings warning. What do the shorts see that investors obviously don't? I checked with one today who focuses largely on retailers and has been among those sounding the siren on Five Below. Here's a summary of what he said. If nothing else it provides a good look at why sometimes the shorts know before the company: "For me it was a number of factors that began with the jailbreak of insider sales. Insiders sell all the time, but to my knowledge I had never seen such a large percentage of shares outstanding sold in such a short period of time....."READ FULL POST
01/10/14 - 08:48 AM EST
If nothing else, the government's case against Diamond Foods should be a reminder that some companies and execs -- even today, with laws supposedly in place to deter malfeasance -- will pull out all stops to blatantly manipulate earnings in an effort to beat the street.The SEC announced Thursday it had sued the company, its former CEO Michael Mendes and CFO Steven Neil. The company and Mendes have settled. Neil hasn't. His attorney told the Wall Street Journal he didn't settle because he did nothing wrong. That'll be something for the courts to decide, but the lawsuit should be required reading because the charges read straight out of a "how to fool investors" handbook. The Diamond story, with questionable accounting first unearthed by the research firm Off Wall Street, and written about several times in Barron's -- back when nobody cared -- suggested the company was manipulating the timing of walnut payments to farmers. It was a classic case of the company and bullish analysts trying to discredit the critics. The SEC's lawsuit, however, shows just how crafty a company can be......READ FULL POST
01/08/14 - 02:52 PM EST
Back in November, I wrote a piece questioning whether activists are engaging in a new-age greenmail. It was tied back to deals involving Take-Two Interactive, ADT and Yahoo buying back big stakes from activists.In the piece I quoted veteran money manager John A. Levin as saying, 'While there is nothing wrong apparently with an activist going on board and selling stock back to the company -- and apparently nothing wrong with the company buying it -- I don't feel it's good public policy and feel the public should have a chance to participate in these transactions.' A week ago Levin went on to pen an op-ed piece in the Wall Street Journal, in which he elaborated:'In the U.S., all tenders should ideally be open to all shareholders. At a minimum, when a corporation allows directors to selectively tender their stock-an event that should be considered a material development-the Securities and Exchange Commission should enact rules to ensure the fairness of those transactions for all shareholders. A relatively simple SEC rule change would require that companies file notice of the proposed purchase of stock held by directors with a two-day waiting period. . . .'READ FULL POST
01/07/14 - 01:53 PM EST
The FTC's press conference on weight loss and skin cream claims focused on a few small companies that advertise in the media. It was pretty much a nonevent (except, of course, for those companies and its victims.) But this was interesting: The New York Post's Michelle Celarier asked whether the agency would be looking into companies that market through other channels, like multi-level marketing. She noted that prior to the press conference there had been some stories wondering whether Herbalife or Nu Skin might be mentioned. Jessica Rich, director of the FTC's Bureau of Consumer Protection, replied: "We read those same stories. We can't comment on companies we haven't brought actions on in the past because investigations are nonpublic." Then she quickly added, "We have other investigations going on..."READ FULL POST
01/07/14 - 12:24 PM EST
Whenever a bullish or bearish analyst veers from the pack, it's noteworthy. With Netflix NFLX, it was noteworthy when Janney's longtime bear Tony Wible turned bullish just before the stock took off. For that reason, it's equally noteworthy that longtime bull Scott Devitt turned bearish. Too soon? That's what my colleague Jim Cramer said on CNBC's Squawk on the Street this morning. I think his exact word was, "premature." And he may be right, but every call by every analyst, especially on a hot momentum stock, can't always be viewed as the moment of truth. It's not always about every tick of every trade. There's nothing wrong with trying to get ahead of the curve.READ FULL POST
01/02/14 - 02:58 PM EST
With the new year under way, let's get started with a look ahead and an audit of stocks on my Watch List. When you primarily fly red flags in an almost straight-up market -- which confuses brains in a bull market -- you just keep plowing ahead. I've been there, done that and doing it again. As longtime readers know, I don't make stock calls. I point out risk. And I don't view a story as having been proven right or wrong just because a stock rises or falls yesterday, today or even last year. (For that reason, I think it's an absurd measurement to judge investment managers on performance in a single 12-month period, but I digress.) Many of these stories can take time -- sometimes a long time -- to play out. They're not calls on the stock, but on risk that can get in the way of a stock. Rising stocks, especially in indiscriminate bull markets, can paper over any number of risks -- until they don't.READ FULL POST
12/19/13 - 02:47 PM EST
It may appear obvious to you, because you're an investor in a company whose shares have been pummeled. Maybe the past few quarters were horrible. Or maybe you're an employee, a former employee, a customer or a supplier. Everybody thinks they know who the year's worst CEO is -- or should be. Every year I go through this exercise of trying to determine who should be the worst CEO and who the runners up should be, and every year I anguish over it. I screen for bad performers looking at stock prices overlaid with various financial metrics. (My favorite is anything that shows growth, or lack thereof, though that can be skewed by acquisitions.)I solicit ideas from readers, social media followers and viewers. I consult with colleagues and analysts. I try to avoid being tempted by what might a good headline vs. who really deserves it.And then...I pick.READ FULL POST
12/16/13 - 04:35 PM EST
Yep, I know, with audited results Herbalife is free to do a big buyback, go private, whatever.BUT, in listening to Carl Icahn talk earlier today on CNBC about how the auditors somehow validate that Herbalife is a viable biz, all I could think: Let's not forget, the role of the auditor is to determine whether the numbers are audited in accordance with GAAP, not to weigh in on the bigger controversy, that is whether the company is operating an illegal pyramid scheme.And this re-audit of Herbalife's statements isn't because the company's numbers are suspect; instead, it arises because its former auditor had engaged in insider trading on Herbalife's stock.The company says there are no material changes in the audited reports, but it will be interesting to see just what changes there are. (Materiality, after all, is in the eyes of the beholder.)READ FULL POST
12/12/13 - 11:09 AM EST
Yet again names like Ulta Salon, Lululemon and Lumber Liquidators prove that the only thing that matters is when the company itself concedes that what was believed to be, isn't. That theme continues to rage through this Greater Fool's Theory market, as I have called it, leaving all who dare question the king looking like the joker ... until they aren't.That's something to think about as companies like Green Mountain continue to win favor in this super-caffeinated market, with the hype and hope of new products years out. A momentum-driven market like this rewards hype with the valuations of hope. It's perfect for the "buy on the rumor" pump, which can lead to valuations that for all but perfection leads to "sell on the news" dump.READ FULL POST
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