Thursday, 13 August 2009 01:00

This pretty much says it all...

From Bloomberg: Walmart Earnings Top Analysts' Estimates on Cost Reductions; Revenue Drops

Aug. 13 (Bloomberg) -- Wal-Mart Stores Inc., the world's largest retailer, reported second-quarter profit that exceeded some analysts' estimates after managing inventory to lower costs. Comparable-store sales trailed the company's forecast. This is a problem, dear readers. Walmart has the most volume, the lowest source costing, and the most clout in the physical retail universe. Even they are missing on the revenue front., on their OWN forecasts, not just the sell side. This is where everyone goes to SAVE money. The revenues did not move to Saks Fifth Ave! Cost cutting is a one, maybe two quarter fix, and that's it! Why is no one bearish on this news??? Notice the MSM spin to the positive.

Net income totaled $3.44 billion, or 88 cents a share, the Bentonville, Arkansas-based company said today in a PR Newswire statement. Analysts projected 86 cents, the average of 22 estimates compiled by Bloomberg.

Walmart said it will accelerate efforts to reduce costs. It cut prices on its Sam's Choice black angus beef patties, baked beans and flat-panel televisions to lure consumers grappling with shrinking paychecks and the worst unemployment since the Great Depression. Revenue in the three months ended July 31, including membership income, fell 1.4 percent to $100.9 billion as the stronger U.S. dollar reduced the value of overseas sales.

Published in BoomBustBlog
Monday, 01 June 2009 01:00

Sears Q1 2009 Update

The Sears Q1 2009 update is available. I have left a note in the private discussion forums regarding aspects of Sears not mentioned in the note.

Sears Q1 2009 Update Sears Q1 2009 Update 2009-06-01 12:28:26 398.99 Kb

I will probably be releasing the first of the long-biased research in about 2 weeks (probably less). I have found some pretty strong companies. I will explain how I will be using the research (basically as a medium to long term hedge and volatility dampener) before I actually release the research. Let it be known that the recent run-up in many stocks is not fundamentally based (ie, unsustainable) therefore strong fundamental long picks will not necessarily produce the results that layman would expect in the short term. I will be discussing this in depth as the research release draws closer.

Additional, new non-financial and non-real estate related short bias research will be available during the same time frame.

Published in BoomBustBlog
Sunday, 31 May 2009 20:00

Sears Q1 2009 Update

The Sears Q1 2009 update is available. I have left a note in the private discussion forums regarding aspects of Sears not mentioned in the note.

Sears Q1 2009 Update Sears Q1 2009 Update 2009-06-01 12:28:26 398.99 Kb

I will probably be releasing the first of the long-biased research in about 2 weeks (probably less). I have found some pretty strong companies. I will explain how I will be using the research (basically as a medium to long term hedge and volatility dampener) before I actually release the research. Let it be known that the recent run-up in many stocks is not fundamentally based (ie, unsustainable)  therefore strong fundamental long picks will not necessarily produce the results that layman would expect in the short term. I will be discussing this in depth as the research release draws closer.

Additional, new non-financial and non-real estate related short bias research will be available during the same time frame.

Sunday, 31 May 2009 20:00

Sears Q1 2009 Update

The Sears Q1 2009 update is available. I have left a note in the private discussion forums regarding aspects of Sears not mentioned in the note.

Sears Q1 2009 Update Sears Q1 2009 Update 2009-06-01 12:28:26 398.99 Kb

I will probably be releasing the first of the long-biased research in about 2 weeks (probably less). I have found some pretty strong companies. I will explain how I will be using the research (basically as a medium to long term hedge and volatility dampener) before I actually release the research. Let it be known that the recent run-up in many stocks is not fundamentally based (ie, unsustainable)  therefore strong fundamental long picks will not necessarily produce the results that layman would expect in the short term. I will be discussing this in depth as the research release draws closer.

Additional, new non-financial and non-real estate related short bias research will be available during the same time frame.

Wednesday, 20 May 2009 01:00

Pre-paid Legal Technical Analysis

A reader has contributed some of this technical analysis and I thought the Blog would be interested in seeing his views on PPD. As all should know, I supply on fundamental analysis and a global macro overview, thus those who are interested in prospective entry and exit points may find this of interest. Keep in mind that this is for illustrative purposes only and I do not warranty, in any form or fashion, the accuracy, validity or completeness of this work. Basically, I am just passing it along. Reader's contribution of technical analysis of Pre-paid Legal Reader's contribution of technical analysis of Pre-paid Legal 2009-05-20 09:39:06 392.42 Kb

I will be posting additional charts, macro stuff, and a lot of subscriber only content. I have been reviewing many of the reports that I have issued over the last two quarters, to confirm that the thesis behind them still stands valid. The bear market rally has extended farther and been more aggressive than I (and most others) have anticipated, thus I need to confirm the validity of my viewpoints. I have also started running a bull market thesis to compete against my bear thesis, basically starting a full fledged devil's advocate program in my analyst camp. I will be releasing the results to my subscribers, and to a lesser extent to the free blog.

Published in BoomBustBlog
Friday, 01 May 2009 01:00

More on Prepaid Legal Services

Looking at how the share price of this company went up in a downward/sidewards trending market after mediocre (and worse than that if you parse through the numbers) earnings and their outright saying that the the company will buy back shares although management consistently sells shares, I did some Googling.

Well the company has been in trouble many times before, but is quite lucky. There are some regulators that frequent my site, and I urge you to take a look at this company. It is really appears to be getting away with murder.

From the Street.com:

In a regulatory filing on Tuesday, Pre-Paid disclosed that its independent auditor, Grant Thornton, has found itself unable to sign off on the company's 2004 financial statements due to "material weaknesses" with the company's internal controls. More specifically, Pre-Paid said that Thornton has raised questions about the company's processing of commissions -- which have led to material restatements in the past.

Published in BoomBustBlog
Thursday, 30 April 2009 01:00

PPD 2009 First Quarter Update and Comment

I had the analyst perform a quick scan of PPD's latest quarterly result and prepared some points on its relative strength and outlook. However, we could not find in greater details on what exactly is the FTC investigation regarding misrepresentation in the sales materials used in Identity Theft Shield and ADRS program. The company called this investigation as routine and incidental to its business. We are further scouring through the footnotes to find additional tidbits which can throw some more light in this matter.

Following are some of the key highlights of PPD's latest quarter results:

  • PPD's total active membership declined 3.2% y-o-y in 1Q 09 after shrinking 1.2% in 4Q 08, while at the same time total revenue fell at a lower pace of 2.7%. Membership fees which constitute 94.5% of the total revenue declined 2.0% to US$106.9 million from US$109.1 million in the comparable quarter a year ago. The company alleviated the impact of the sharp fall in the membership sale by increasing the new associate membership fees by 66.6% to US$119.17 from average of US$71.53 in 2008. They have done this several times, even as associates strain to make money and revenue and membership trend downward. This is how they are attempting to plug the holes in the revenue leakage. The advertisement of the company as a financial independent person for the members makes it easier to achieve enrollments during the economic downturn as unemployment remained very high.
  • During the first quarter ended March 31, 2009, net income increased 7% to US$17.1 million from US$15.9 million a year ago. This was due to the decline in the operating cost by 5.2% to US$85.7 million. Please note that in our earlier report, we had explicitly highlighted that the company's commission structure is very stringent for the employees to succeed in this scheme. This is one of the key reasons as to why PPD has a very low success ratio for its members as the stringent commission norms forces them to quit the company after sometime while the management (and senior level directors) make money. In this backdrop, the commission expenses fell 12.4% to US$27 million which helped in reducing the operating cost. Again, the hole in revenues are trying to be plugged upon the back of their already marginal performing sales force.
  • Diluted earnings per share jumped 17.8% to US$1.52 per share from US$1.29 per share a year ago. Despite 7% growth in net income, the company achieved 18% EPS growth largely due to the reduction in the outstanding shares which fell by 11%. The company repurchased 422,505 shares at an average per share price of US$32.05 in the first quarter of 2009, returning around US$13.5 million to the shareholders. However, around 56% or US$7.5 million were sold by directors of the company. Just to reemphasize the point we have already made earlier, the management has repurchased US$420.7 million of common stock since April 1999 while the share price remained around the US$30-US$35 level.
  • Net cash from operating activities soared 42.4% to US$29.7 million in 1Q 09 from US$20.8 million in 2008. A fall in income tax payment of US$5.4 million positively impacted the operating cash of the company in the first quarter of 2009. This is not an economic increase in operating earnings!

As I mentioned earlier, we are further digging into finding more about the FTC investigation.

Published in BoomBustBlog

Pre-Paid Legal Services, Inc. (NYSE: PPD) announced results for the first quarter ended March 31, 2009. Net income for the first quarter of 2009 increased 7% to $17.1 million from $15.9 million for the prior year's first quarter. Diluted earnings per share increased 18% to $1.52 per share from $1.29 per share for the prior year's comparable quarter due to an increase in net income of 7% and a 9% decrease in the weighted average outstanding shares (the share buyback trick). Membership fees in the first quarter of 2009 decreased 2% to $106.9 million from $109.1 million for the same period last year (as anticipated, membership fees are dropping – this is the bulk of their revenue base).

Net cash provided from operating activities increased 42% to $29.7 million for the first quarter of 2009 from $20.8 million for 2008 primarily due to higher cash taxes paid during the 2008 period (All you need to do is read this statement slowly to recognize the misnomer. They did not generate more cash this quarter from operations, they paid higher cash taxes last quarter. Normalize the earnings on a pre-tax basis to get a truer gauge of operating performance). During the 2009 first quarter, we returned $13.5 million to shareholders through the repurchase of 422,505 shares of common stock, at an average per share price of $32.05. Why do this when you are losing revenue? Since April 1999, we have returned $420.7 million to shareholders through the purchase of 14.2 million shares, average price of $29.69 per share, and $17.1 million in dividends for a combined total of $437.8 million representing more than 110% of our net earnings during the same timeframe. Now, we all know that they didn’t return $420.7 million to their shareholders. They bought back stock, enabling management to sell into the corporate share buyback. This statement is about as accurate as the “cash provided from operating activities” statement above. At March 31, 2009, we had $52.6 million of debt outstanding and $68.5 million in cash and cash equivalents and unpledged investments.

Published in BoomBustBlog
Page 4 of 7