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Greenberg: Netflix = Tesla = Amazon

01/23/14 - 11:50 AM EST

David Einhorn wrote something interesting in his quarterly investor letter: 'The parabolic rise of a growing number of market-leading story stocks created a challenging environment for value investors. Speculators have momentarily accepted the ruse that, for these visionary companies, profitability would be a mistake. Eventually, the market will remember that having a disruptive product that customers will happily buy if sold near cost is not the same as having a valuable business.' And therein lies the story of this market and the story of so many companies that, based on the numbers, may look as if they're perched on a precarious ledge, but based on their stocks, appear to be anything but.


Greenberg: Is Costco Vulnerable to Online Avalanche?

01/22/14 - 11:03 AM EST

Retailers have been blaming everything and nothing for the recent spate of bad performance. In the end, however, it may be rather simple: For the first holiday ever, online shopping really appears to have hit a point of critical mass.Consider, for example, Pacific Sunwear CEO Gary Schoenfeld's comments in recent earnings guidance, when he said, "Business picked up in the final few days prior to Christmas and then finished the month strong as self-shoppers came back to the mall."The key to his comment was his mention of "final few days prior to Christmas," which coincidentally ties into the amount of time the window generally closes for all but costly overnight deliveries for online shoppers. Enter Costco: As great of a retailer as Costco is (and I do mean great), it has done woefully little online. Its barebones Web site is hardly a destination, certainly not for competitive shopper. And its online sales, while an enormous $3 billion, account for only about 2.5% of revenue.


Greenberg: Wall Street Tires of IBM's Managed Earnings

01/22/14 - 07:12 AM EST

For the fourth-straight quarter, investors are sending a message to IBM: Enough with the managed earnings, just show some growth. As revenue growth slowed at IBM in late 2011 and early 2012, investors were willing to cut Big Blue some slack. This was, after all, IBM, which had hooked investors on the simple concept of a 'roadmap' with a five-year earnings-per-share target. The 2010 roadmap was nothing short of a spectacular success, as the company exceeded its target of at least $11.10 per share. It was no surprise, then, that IBM upped the ante, with a new five-year 'roadmap' that included a goal of at least $20 in 'operating' EPS by 2015. From that point on, until a few quarters ago, nothing else mattered but the $20 target. Then, as I wrote a quarter ago, as the stock started to sink, investors woke up and realized that risk (and reality) was finally catching up with IBM.


Greenberg: Nu Skin's Lesson on Short Squeezes

01/17/14 - 10:24 AM EST

Over the past year or two or three or -- gee, longer than I like to think -- there has been a tendency to get giddy over short squeezes. This is when stocks rise so quickly that shorts have no choice but to duck and cover. As they buy the stocks they have borrowed, at higher prices, this causes stocks to rise with even more gusto. Making money on the long side has never been so easy. But there's a downside: When the shorts are gone, so are the natural buyers and as Nu Skin NUS showed in recent days stocks can fall in a vacuum. Which is all a long-winded way of pointing out how management that is obsessed with short-sellers should be careful of what they wish for....


Greenberg: Should Herbalife, Usana Worry in China?

01/16/14 - 10:52 AM EST

It's the question that now has to be asked: Should all multi-level marketers in China be worried?Probably, or at least a little nervous.Multi-level marketing is banned in China, where direct-selling licenses are required in all municipalities and provinces. Nu Skin lays out the challenges in its10-K, with the kind of boilerplate the most investors gloss over:"As a result of restrictions in China on direct selling activities, we have implemented a retail store model utilizing an employed sales force and contractual sales promoters, and we are currently integrating direct selling in our business model in this market pursuant to applicable direct selling regulations. The regulatory environment in China remains complex. . . . "


Greenberg: Will Valeant Overdose on Acquisitions?

01/16/14 - 09:12 AM EST

If you've never heard of Valeant Pharmaceuticals, maybe you've heard of its predecessor Biovail, which for years was among the most controversial drug companies. Or perhaps you've heard of the more than 60 acquisitions Valeant has done in six years, including its most recent deal -- to buy Bausch & Lomb, the maker of eye-related products. It's a classic and unabashed rollup of companies in the specialty pharma sector -- and, with the Bausch & Lomb deal, pharma in general, if not more. Valeant has a top-notch roster of investors, including ValueAct, and its stock has been nothing short of a jaw-dropper...


Greenberg: Nu Skin's New China Headache?

01/15/14 - 11:08 AM EST

Nu Skin is trading lower today on the heels of what appears to be an investigative story in the People's Daily, the communist party's main mouthpiece, suggesting that Nu Skin's China operations are a pyramid scheme. The piece is not on the paper's English language site, but I've confirmed its legitimacy. Multi-level marketers are tightly regulated in China, where multi-level marketing as practiced in the U.S. is prohibited. If you open the piece in Google, just hit "translate." It's a crude translation. Crux of the story: The reporter claims to have found multiple instances of misleading advertising and marketing and business practices.


Greenberg: Intuitive's Good News -- Less Bad

01/14/14 - 11:12 AM EST

I've said in the past that this coming earnings report for Intuitive Surgical will be an important one, especially on the heels of two horrific, off-the-cliff quarters.The company needed to show stabilization -- and based on guidance it provided today, ahead of next week's earnings release, it did.The headline news: Total revenue of $576 million for the fourth quarter will beat analyst estimates. That's better than the 7% decline in the third quarter. However, for perspective: It's still down 5% from a year earlier, when the company was posting a 22% gain.


Greenberg: Picking at Country Style Cooking's Guidance

01/13/14 - 04:06 PM EST

Truth stranger than fiction department: Shares of Country Style Cooking CCSC, operators of a chain of popular restaurants in China, are sizzling after the company issued a press release today saying it 'anticipates' fourth quarter revenue will 'slightly' beat guidance.However, by slightly beating guidance it will just meet full-year guidance. Here's the math: Prior Q4 guidance was $53.2 million to $54.8 million. Revenue for the first nine months were $166.383 million. Full-year guidance calls for $220.4 million to $221.1 million.To get to that range Q4 would have to be $54 million to $55.07, the mid-point of which is (drumroll!) $54.8 million -- the prior guidance that is being beaten.


Greenberg: SodaStream Story Goes Flat

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.....


Herb Greenberg is the editor of Herb Greenberg's Reality Check, a subscription newsletter designed to help investors better manage risk.

Greenberg has been a financial journalist for more than 30 years, working most recently as a senior stocks commentator on CNBC's business day programming and on He was also co-president of Greenberg Meritz Research & Analytics. He is a former weekend investor columnist for The Wall Street Journal and a former senior columnist for MarketWatch.

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Prior to joining MarketWatch, Greenberg was senior columnist forTheStreet. He previously spent 10 years as the "Business Insider" columnist for the San Francisco Chronicle and nearly seven years asFortune magazine's monthly "Against the Grain" columnist. Before that, he was the New York financial correspondent for the Chicago Tribune and a financial reporter in its Chicago newsroom. Greenberg has held various positions at other media outlets including Crain's Chicago Business and the St. Paul Pioneer Press.

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