05/12/14 - 08:58 AM EDT
All you need to know about Boulder Brands in the wake of its first-quarter results last week is that the growth of its Udi's gluten-free bread as well as the Udi's and Glutino brands combined is tumbling.Last quarter Udi's grew 37.4%; that's down from 62% a year earlier. And Udi's and Glutino combined grew at 31%, down from 50%.Margins aren't looking too hot either, with the gross margins sliding to 37.7% from 41.4% in the previous quarter and 42.7% a year ago. The company blames the margin, in part, on the impact of high egg white prices.Speaking on the earnings call, CFO Christine Sacco said:Despite higher egg white prices, we expect gross margin to benefit from a number of initiatives. The first is an improvement in our cost of goods, as we are in the process of improving our formulation, which requires less egg whites. This new formulation is in production, and when inventories flow through it will have a meaningful impact in Q3.Reality: One of the reason's Udi's has done so well is because many consumers prefer its taste to other gluten- free products.READ FULL POST
05/08/14 - 11:15 AM EDT
The other day I tweeted that if Green Mountain and SolarCity could hold their post-earnings gains, especially if the news wasn't great, it could mark a turning point for the momentum names in this market. Both are poster children of a market gone wild. As I write this, that's just what is happening as momentum investors, stung from the market's recent upheaval, reach for straws (or reasons to buy.) Green Mountain beat the street, but guided earnings to below expectations. SolarCity, as I wrote in Reality Check today, used a classic diversion tactic by giving its 2015 guidance at least six months prematurely. None of that, of course, matters. Investors who look for reasons to buy will see the glass as half full; just the opposite when they're headed for the exits...READ FULL POST
05/07/14 - 01:36 PM EDT
When SolarCity SCTY reports earnings post-close today, keep an eye on the made-up metric the company (and some in the solar industry) uses and Wall Street focuses on: Retained value. This, in effect, is a future stream of revenue, projected over 20 years, and discounted at (a discretionary) 6%. It was $1.052 billion last year, roughly double a year earlier. It's right up there, as a stock-driver, with installed megawatts, which this year is expected to double from a year ago. As I wrote in Reality Check back in March, it's part of a company that -- after a good scrubbing of its financial statements -- appears to be too complicated for its own good. And that's not just me saying it. The company says it, or a variation of the word "complex," six times in its 10-K -- one more time than it did a year ago....READ FULL POST
05/02/14 - 05:55 PM EDT
In my world, when companies attack a critic, in an effort to discredit, it often means one thing: It's an effort to make people look over here, not there. So when I read Herbalife's press release from Thursday aimed at pre-responding to a Herbalife event sponsored by Bill Ackman, I couldn't help but think about the classic crisis PR ploy of discrediting the critic. Here's the paragraph in question: "As for the event's new moderator, Robert Fitzpatrick, a self-proclaimed expert in multi-level marketing, he is a known critic of the industry, and a consultant to Mr. Ackman and three-time convicted felon and perpetrator of fraud Barry Minkow. Herbalife believes Mr. Fitzpatrick's involvement is further evidence that this 'documentary' is merely another biased attack on our company." Ah, the old "guilt by association" trick!READ FULL POST
05/02/14 - 02:05 PM EDT
I learned firsthand about the power of this thing called the "cloud" back in 2009 when I co-ran a small independent research firm. As I wrote on CNBC.com Thursday, we needed encryption and we were using a cumbersome EMC product for our small group of a few dozen clients. It was a powerful product, but the clients hated it because they had to install something on their computer. We hated it because between licenses and service costs, it was way too expensive and overkill for our small business. It was also technologically cumbersome. Then I started searching for alternatives and I found WatchDox, a private company that did exactly what we needed at a fraction of the cost with none of the headaches. Our clients loved it, too. That was when the light bulb went off in my head about this thing called "the cloud"......READ FULL POST
05/01/14 - 10:34 AM EDT
What makes this earnings season different than others? Everybody had a free pass to blame the weather.Everybody didn't use it.Chipotle didn't. Buffalo Wild Wings didn't. As Buffalo Wild Wings CEO Sally Smith said on her company's earnings call, "We usually keep our comments about weather to a pretty much minimum because weather happens every year." She's right, but the worst winter in recent memory did have an impact; and the only company I've seen quantify it is Sally Beauty.READ FULL POST
04/30/14 - 01:59 PM EDT
One of the great veteran forensic analysts, Ted O'Glove, is out with a piece on The Motley Fool suggesting that it's time to start thinking about breaking up Berkshire Hathaway.For those of you who don't know O'Glove, a quick backgrounder: He's best known as the author of Quality of Earnings, long considered a must-have in the library for for serious investors. He wrote it in 1987. Earlier he was best known for co-authoring the Quality of Earnings Report with Bob Olstein, who now runs Olstein Funds.At 80, a few years younger than Berkshire CEO Warren Buffett, O'Glove can spot a fad, and a good investment, a mile away. He can read the footnotes better than anybodyHe's a huge fan of Berkshire and Buffett, which is why his piece is so interesting.READ FULL POST
04/30/14 - 10:35 AM EDT
Well before Twitter went public with a market value of $14 billion, I remember going on CNBC with others shaking our heads at what at the time was believed to be a ridiculously high $10 billion valuation.The value was extrapolated from the trading of its private shares on the secondary market and the reported dollar amounts of latest rounds of venture financing.At the time, there was chatter whether Twitter could or should be acquired. Early on, Google was always pegged as a likely choice -- until it started Google Plus. Then Apple's name would surface, as would every cash-rich company out there.Then came Twitter's IPO last November at $26, or $14 billion, with the stock getting bid as high as $73, or a ridiculous $40 billion.It's now around $21 billion, likely on its way much lower.In the end, I blame this not on Twitter but on Wall Street. Twitter's mistake, I would argue, was going public.READ FULL POST
04/29/14 - 12:31 PM EDT
When Oracle execs rang the opening bell of the New York Stock Exchange today, the banner behind them read, "Engineered for the Cloud." A few hours later the company was planning to host something it calls "The Oracle Cloud Forum."But roll back the clock to an analysts' day in October 2009 and Oracle CEO Larry Ellison, nobody's fool, wasn't waxing so philosophically about "the cloud."After being somewhat sarcastic about the brewing euphoria over the word "cloud," he said:"...As far as the Cloud, I make jokes about Cloud computing because obviously Cloud computing is something totally different really. Does it use Intel microprocessors? Those aren't new. Does it use memory from Samsung? That's not new. Does it use Cisco networking? That's not new. Does it use Linux and Solaris and Oracle and MySQL? None of those are new."READ FULL POST
04/29/14 - 06:30 AM EDT
Multi-level marketer Herbalife's decision to kill its dividend and instead use the money to buy back more shares is both brilliant and high risk.It's brilliant from the perspective that it will likely shake out marginal investors who might be quick to sell on the first sign of negative news. Instead, Herbalife will have more firepower to help squeeze earnings per share higher while supporting its stock in the face of news that normally might have shaken it.At the same time, by getting rid of the dividend, Herbalife risks getting kicked out of index and other mutual funds that only hold dividend-paying stocks.Here's where it gets tricky (and risky): Herbalife CEO Michael Johnson said in a press release that he believes the decision to increase buybacks "reflects our continued commitment to creating long-term value for our shareholders."That may be. Trouble is, there is no shortage of companies whose CEOs said the same thing, only to buy high and see their stocks go lower.READ FULL POST
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