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The Best of Kass

Again, while there can be numerous reasons for an exercise and sale of stock well ahead of expiration (see above), we should ask ourselves, why would this executive exercise an option more than five years before the option expired? Why wouldn't the insider wait, especially if he had confidence in Grand Canyon's franchise and future revenue and profit growth? Isn't the exercise a vote of no confidence in the company's future?

Inquiring minds want to know!

At the time of publication, Kass was short LOPE.

Reinstating Goldman Short
Originally published on Thursday, Feb. 28 at 10:12 a.m. EST.
  • UBS sees headwinds.

I am reinstating my Goldman Sachs (GS - Get Report) short at $151.50 -- I feel naked without it!

More seriously, UBS reports this morning that after a strong January, the "market environment is not as constructive." This might surprise many who think that Goldman's business is robust in concert with a near new high in the S&P 500.

With limited visibility regarding regulatory change, UBS sees some headwinds facing the company (but with the ability to manage expenses) and has a price target of $145.

Bottom line: UBS views GS as a well-run franchise with the ability to be flexible in its cost structure, but the brokerage believes Goldman's positives are more than fully discounted in the current share price.

At the time of publication, Kass was short GS, SPY.

Why I Sold Facebook
Originally published on Wednesday, Feb. 27 at 10:26 a.m. EST.
  • BTIG's downgrade made some salient points.

Yesterday I sold my Facebook (FB - Get Report) shares, and I promised to explain why.

What turned me around on this name was BTIG's Richard Greenfield's research report in which he downgraded the stock to sell.

If you can access BTIG Research (registration required) and you are involved in the stock, I suggest you read his analysis.

Salient points:
  • 2013 sales and profits will miss consensus, as desktop ad revenue peaks and mobile growth is not rapid enough.
  • 2014 looks worse, and below-consensus results are expected.
  • Valuation, at 17 times 2014 EBITDA and 45 times free cash flow, is full and vulnerable to misses to consensus.

The shares are trading lower today probably based on:
  1. an article in The Wall Street Journal that suggests Twitter is monetizing better than Facebook; and
  2. the buy on rebalance today is less than previously thought.

At the time of publication, Kass had no positions in stocks mentioned.

Doug Kass is the president of Seabreeze Partners Management Inc. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.

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