Monday, 05 October 2009 20:00

Option Strategy Analysis Update

The market neutral option strategies analyzed and made available for download last quarter have effectively accomplished their mission, namely allowing one to maintain a bearish position while still being able to profit from spikes in the market. In periods of uncertainty, this is the methodology that I will fall back on personally, although the directional positions are the ones that reap my windfall profits. 

The following are the updated payoff's for selected optimal strategies for rhe S&P index, GS, JPM, AXP, HOT, STI, CAT and MAC (subscribers, see the downloads section for the strategies and the forensic analysis of each company). We have computed revised breakeven points, initial cost, payoff matrix, implied volatility and option parameter for the optimal strategies selected previously. I will post these figures in detail within 24 hours, but here is the synopsis.

Thursday, 17 September 2009 20:00

An Independent Look into JP Morgan

The JP Morgan forensic preview is now available. Remember, this is not subscription material, but a "public preview" of the material to come. I thought non-subscribers would be interested in knowing what my opinion of the country's most respected bank was. There is some interesting stuff here, and the subscription analysis will have even more (in terms of data, analysis and valuation). As we have all been aware, the markets have been totally ignoring valuation for about two quarters now. It remains to be seen how long that continues.

Click graph to enlarge

Thursday, 17 September 2009 20:00

An Independent Look into JP Morgan

The JP Morgan forensic preview is now available. Remember, this is not subscription material, but a "public preview" of the material to come. I thought non-subscribers would be interested in knowing what my opinion of the country's most respected bank was. There is some interesting stuff here, and the subscription analysis will have even more (in terms of data, analysis and valuation). As we have all been aware, the markets have been totally ignoring valuation for about two quarters now. It remains to be seen how long that continues.

Click graph to enlarge

HOT's 2Q09 results analysis

Starwood Hotels reported a tough 2Q09 with revenues (excl other revenues from franchised and managed properties which are reimbursements of costs incurred on behalf of managed hotel properties and franchisees) declining 31.5% (y-o-y) to $707 mn in 2Q09 from $1,032 mn in 2Q08. Steep declines in ADR and occupancy are pushing down the REVPAR at owned hotels, resulting in 36.5% (y-o-y) decline in revenues from owned, leased and consolidated joint venture hotels to $394 mn in 2Q09 from $620 mn in 2Q08. REVPAR for comparable owned hotels worldwide declined 32.6% (y-o-y) with hotels in North America witnessing a decline of 31.4% and international hotels recording 34.8% decline. Starwood's management and franchise fees declined 14.2% (y-o-y) to $187 mn in 2Q09 from $218 mn in 2Q08 as the revenues at the managed and franchised hotels plunge due to double digit decline in REVPAR at the managed and franchised hotels. REVPAR for the comparable systemwide hotels, which include worldwide owned, managed and franchised hotels, declined 25.9% with sharp declines recorded across all geographies. Further, the revenues from vacation ownership declined 35.1 %( y-o-y) to $126 mn in 2Q09 from $194 mn in 2Q08.

HOT's 2Q09 results analysis

Starwood Hotels reported a tough 2Q09 with revenues (excl other revenues from franchised and managed properties which are reimbursements of costs incurred on behalf of managed hotel properties and franchisees) declining 31.5% (y-o-y) to $707 mn in 2Q09 from $1,032 mn in 2Q08. Steep declines in ADR and occupancy are pushing down the REVPAR at owned hotels, resulting in 36.5% (y-o-y) decline in revenues from owned, leased and consolidated joint venture hotels to $394 mn in 2Q09 from $620 mn in 2Q08. REVPAR for comparable owned hotels worldwide declined 32.6% (y-o-y) with hotels in North America witnessing a decline of 31.4% and international hotels recording 34.8% decline. Starwood's management and franchise fees declined 14.2% (y-o-y) to $187 mn in 2Q09 from $218 mn in 2Q08 as the revenues at the managed and franchised hotels plunge due to double digit decline in REVPAR at the managed and franchised hotels. REVPAR for the comparable systemwide hotels, which include worldwide owned, managed and franchised hotels, declined 25.9% with sharp declines recorded across all geographies. Further, the revenues from vacation ownership declined 35.1 %( y-o-y) to $126 mn in 2Q09 from $194 mn in 2Q08.

Wednesday, 22 July 2009 20:00

DCF analysis explanation for K12 analysis

A few have wondered about the utility of using DCF in our K12 analysis posted the other day (see The Long-biased Forensic Analysis is Now Available to the Public). In particular, a question was brought to me as follows: "Isn't WACC at 7.4% really low for doing the DCF? You can't really use CAPM, because the beta would be skewed somewhat because the company just isn't that old. Using the build up method, I'm coming up with a WACC in the 11% plus range. Which would then drive down the per share price."

I would like to take the time to explain our conservative methodology.

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