Monday, November 30, 2009

11/30/09 Midday Report: Business and Retail Activity Disagree Like My Stomach and Ten Day Old Bean Burritos That Have Been Sitting in the Hot Mexican Sun

Business activity is back as the Chicago ISM reported today its barometer rose to 56.1, the highest level since August 2008, from 54.2 the prior month .   And we all know how much of a difference 56.1 is compared to 54.2, right?  Oh yeah, we don’t, we just take the mindless commentary from Bloomberg/CNBC/ (NSFW, so heads up) and assume it is up, so that is good.  Well according to Bloomberg, above 50 signals an expansion so we went from being in an expansion last month to still being in an expansion this month.  Whoop-de-dam-doo.  What they don’t say is that the magnitude of the expansion is similar to Herve Villechaize getting a boner.

But wait.  Consumers spent $30 less this year (around 8%)  shopping during the Thanksgiving weekend than last year.  Apparently people are only buying shit on discount, like well, like everything.  The consumer is still weaker than a virgin bloody mary and you know what we call a virgin bloody mary?  Shit.
Anyway, today has brought us more mixed news, but it is pretty simple to cut through all of the crap.  Business activity is picking up marginally because businesses cut inventory faster than Tiger Woods cut out of his house once his wife got hold of the 7 iron, so they have to do some rebuilding as the government stimulates the fuck out of the economy (much like a Haley Atwell and Faye Reagan threesome stimulates the fuck out of teenage boys everywhere).  However, jobs are still sparse and people are unemployed so they can only afford to buy stuff on sale or just not at all.  Therefore, inventories may continue to peak up a bit just to replenish what was shitcanned, but it is unlikely they really take off unless people get back to work.

Friday, November 27, 2009

11/27/09 Midday Report: Dubai? Do Sell.

Money Mcbags hopes you all had a good Thanksgiving and were able to "stuff a turkey" thanksgiving night after stuffing yourself with turkey thanksgiving day.  But Thanksgiving is over now and the markets are taking a dive because apparently Dubai can't pay off their debts.  Honestly, this is about as surprising as finding out strippers aren't dancing just to put themselves through college and Britney Spears had boob implants.

For those of you who haven't been paying attention, we're in a bit of a global recession led by financial derivatives exciting a real estate boom.  Over that time, one of the most developing countries was Dubai who now features one skyscraper per every two people (I get floors 1-50, you can have 51-99, and floor 100 we'll just turn into our own personal oda).  Well now apparently Dubai World (the investment are of the Dubai government) wants to suspend their repayments of $60B of debt.  Uh oh, UAE we have a problem.

Money McBags isn't too concered over this since it should have been baked into forecasts.  Dubai having debt issues caused by construction has been known for quite awhile, just ask small public construction management companies like HIL (and Money McBags thinks HIL is a nice little play for you small cap ladies out there looking to add some "steel rods to your portfolio" with little inventory risk.  Actually, it would even be a good play for the guys too.).  The point of all of this is we are still in turbulent times and commercial real estate is still overvalued whether it's in the US, Dubai, or Uzbekistan since we are in a global economy.  So as always be smart out there and remember, Money McBags is here for you.

Tuesday, November 24, 2009

11/24/09 Midday Report: Stocks are down as people hate spending, unless they are spending on cheap shoes

The big news of the day is that the government revised GDP data downward and consumer spending took the brunt of it (which is how it works when consumer spending is 70% of GDP, dipshits).  The new estimates are that there was a 2.8% rise in GDP from this past Q vs. the previously announced 3.5% growth.  While it was inline with the expectations of economists (and we all know what great guessers economists are, which reminds me of the old joke:  Why did the economist cross the road?  Who the fuck cares, now pass the salt.), it showed that the economic resiliency may not be as robust as bulls hoped.  But hey, the economy still grew so round of hummers and lobster tales for Bernanke, right? 

Also in the news today, banks stocks took it in the yingus as the government wants their stimulus funds paid back and people continue to realize the banking system is as healthy as Paris Hitlon's vagina (which of course isn't good since she has herpes).  Additionally, the US fund for bank deposit insurance fell into the red, but don't worry because we can always print more money.

In stock news, DSW shot up on a good earnings report because poor people (US citizens) love them some cheap ass shoes.  Better yet, RVI which owns a disproportionate amount of DSW maintained their huge spread to DSW (a spread larger than the Octomom's punany after dropping out little child protective service kids).  RVI owns around 63% of DSW and yet trades at around 33% of DSW's market cap.  RVI sold it's holdings in Filene's Basement and Value City so all they have now is DSW.  This valuation makes less sense than Ron Artest's singing career or the Lifetime channel (who puts the less in mindless).

The economy can still go either way so as always, be careful out there.

Happy hunting.

Monday, November 23, 2009

11/23/09 Midday Report: Is Midday one word or two?

Ok, before I get to the days’ market happenings, is there a linguist in the house (and not so fast Dell Hymes fans)?  Seriously, are there any cunning linguists out there to help me understand if Midday is one word, two words, or hyphenated?  I googled it and there does not seem to be consensus so fuck if I know.  I am sticking with one word, but reserve the right to change it. 
Speaking of reserving (and yes, that transition was worse than Chastity Bono’s), Federal Reserve Bank of St. Louis President James Bullard (and how bad does it suck to learn you can be a Fed Bank President but you have to be president of the one in St. Louis?  Isn’t that like finding out you are going on a date with a Kardashian but it’s their long lost sister Khlamydia?) was out yesterday saying the Fed should keep buying MBS which has the market all a titter today (Whereas Christina Hendricks has the market all a titter everyday).
Not only has this Bullard guy rallied the market but existing home sales in the US were much better than expectations, so as long as the government keeps giving tax breaks, we’re all good, right?
Oh yeah, commodities are forming their bubble charts (the good part of the bubble, so get in while you can) as the dollar drops lower than Eliot Spitzer’s dignity.  
The market is surging towards its 13 month high and yet the job market continues to go from bad to a little more bad and the economy still waits for the commercial real estate fall (so I am told).  Live it up while you can, if you can, because volatility is likely here to stay.  But for today, it’s all love.

Friday, November 20, 2009

Long Idea: G. Willi Foods (Ticker WILC), It Ain't Just Kishka

What they do: G. Willi develops and distributes kosher food, mostly in Israel but is starting to grow in the United States. They also own 51% of Shamir Salads which makes hummus and is the #3 market share humus maker in Israel.

Look, before we go on I know you're all thinking "What a stupid name for a fucking company" but need I remind you of Yahoo! and Dick's? Sure G. Willi sounds like something a 12 year old says when he gets boner for no reason (and yes I am starting off this analysis with a joke about adolescent penis, so it may be too high brow for most of you, but stick with me), but it comes from the founder/CEO's name which is Williger. Just be lucky his last name wasn't Whizzberg or Fuckfacestein.

As an aside, Money McBags is going to be making many Jewish jokes in the proceeding paragraphs but he is Jewish so it is allowed (His great great grandparents changed their name from McBagberg simply to McBags when they reached Ellis Island), just like Chris Rock is allowed to make african-american jokes and Robin Williams is allowed to make gay jokes. You can make fun of your own kind, so please keep that in mind.

Why Money McBags likes them:

1. Oy vey are they are cheap, we're talking wholesale prices: Honestly, this stock is cheaper than an AIDS ridden whore in a bangkok brothel (and Money McBags loves any destination that is also a command). WILC has an equity market value of $59MM (Money McBags will be using $US figures), $29.5MM in cash and equivalents, and no debt. So an enterprise value of $30MM.

In the first six months of this year they earned $.27 per share. This past quarter, they earned ~$.33 per share (using $1/3.785 New Israel Shekels to translate). However, that $.33 is a bit misleading. Included in their income statement was a one-time capital gain of ~$1.38MM. If you take that one time gain out, their EPS was really closer to $.17. Still, it means they have earned $.44 in 9 months.

If you take the current run rate of $.17 and say there is no seasonality (the company says there isn't), and assume the company is in steady state (which it isn't, more on that later (huhuhuh, I said moron)), that is an annual run rate of $.68. The stock is at $6 including the 50% cash. So it's trading at ~8.5x earnings or ~4.5x earnings not including the cash. Honestly, that is so cheap it's like buy one get one free and you know how us yids like things wholesale. Most packaged goods companies trade at ~14x-15x eps so this is a huge discount (and as you'll see later, there probably should be a discount, but not to these levels).

But let's not just look at EPS, let's look at EBITDA which is a better measure of the company's operating cash flow without having to worry about financing decisions. In the first 9 months of the year, the company has earned ~$5.7MM in operating income. Adding back depreciation of ~$300k per Q, you get EBITDA of ~$6.6MM in the first 9 months. Assuming that is a base case run rate, that is ~$8.8MM annual EBITDA and remember the enterprise value is ~$30MM. I am no maffmatecian (though I will flaunt my Finance MBA when the negotiations for "happy endings" come up), but that is about 3.5x EV/EBITDA. You know what else sells at 3.5x EV/EBITDA? Dirt.

2. It's not just kosher food, it's for fat people, and there are alot of fat fucking people: First of all, I know what you're all thinking, the kosher food market has to be smaller than Lindsay Lohan's panty drawer because Jews make up less than 1% of the world's population. While the Jews are a very small population, they are not the only ones who eat kosher food.

What the fuck this blog is

Money McBags is starting this blog because there are too few dick jokes out there having to do with finance. There are not enough jokes about Ito and his Lemma (or Judge Ito and his dilemma which was that he had to let OJ go even though he was guilty), not enough jokes about Asset Backed Securities (and Money loves him some back assets), and clearly not enough jokes about the merger of Dick's and Chick's from 2007.

It's not clear what this blog will evolve (or devolve) in to, but there will be three constants:

1. Smart analysis and commentary of the markets and/or stock picks.
2. Dick jokes, dick jokes, and more dick jokes.
3. Information that will help make your "portfolio" rise.

Why shoud you listen to Money McBags on this random internet blog? It's very simple.

Money McBags knows the differences between Black-Sholes and Dr. Scholls, heck he even knows the difference between Fisher Black, The Fisher King, and Fisher Price.

Money McBags also knows that John Maynard Keynes was the shiznit and Milton Friedman suffered from profit envy.

Most importantly though, Money McBags knows that there are inefficiencies in the market and he is here to help you exploit them while hopefully making you laugh.

So while this blog is in its nascent stage, stick with it as Money McBags is here to help you understand Wall Street in all it's lunacy.