Tuesday, April 1, 2014

Capstone Turbine (Nasdaq:CPST) High-Risk / High-Reward

Capstone Turbine Corp (Nasdaq: CPST)

This company has been in the business of developing, manufacturing and marketing microturbine technology solutions for a wide range of businesses around the world. Put in simple words, they make turbines to create clean energy relying very little in fossil fuels to do so. You can visit their website to read more of them.

I started following this company about 2 years ago when the price of the stock was about $1.00 or so. I didn't buy there because to me it was too risky and the down potential was far bigger than making money on it. No the company is trading double that price and it is starting to gain traction.

As you can see on their Income Statement posted on Yahoo Finance, the company has been increasing the sales every year for the past three and it looks just as good on this year. A recent video post on You Tube about Walmart introducing a new type of truck (18 wheeler) that will reduce emissions and improve efficiency made me look back at this company again. You can see on the video how that prototype has one of Capstone turbines in it. And although this prototype may never hit the road, this gives us an opportunity to see that the company is actively seeking new ways to innovate.

In my opinion, there's still a lot or homework to do on this company and its stock. But one thing is for sure, it now looks more enticing than 2 years ago. I will start my due diligence on the company before deciding to buy or not the stock but I am more inclined to put some money to work here than I was 2 years ago.

Thanks for reading and I hope to write soon again.

Wednesday, November 20, 2013

J.C. Penney's 3Q 2013 Results - My Opinion.

Today, November 20, 2013 JC Penney announced its third quarter results with a press release followed by a conference call before the markets opened for business.

Overall, I believe that it was good news for the longs (such as myself). However, skepticism is still hanging in there as the material results were disappointing and the only good news are the trends that seem to be improving but are yet to show on the quarterly results.

As promised, I will give you, what I believe are the most important things from the conference call and quarterly results for your review.

  • Mike Ullman the CEO mentioned that "the turnaround for J.C. Penney is beginning to take hold"
  • He also said that during the third quarter "we began generating positive sales momentum". Nevertheless, those positive sales trends are not yet materialized and reflected into this quarter results.
  • Margins on sales are not yet improving. In fact, they are deteriorating based on the same period last year. The only positive sign here is that on October margins did improve sequentially from the previous month. Ullman attributed this to the need of inventory markdowns related to the previous strategy that the ousted Ron Johnson has put in place.
  • Suppliers of JCP are not pulling the plug on them as it may have been mentioned on "inaccurate reports" Ullman said.
  • Sales on JCP.com were up 24.5% y-o-y compared to a (2.2%) in the second quarter. This trend was even better on the month of October to a 37.6 %
  • Store traffic improved sequentially but still remained negative on a y-o-y basis.
  • Gross margins are expected to improve sequentially and y-o-y on Q4, the CFO said.
  • The CFO also mentioned that the expected liquidity of the company at year's end is still expected to be above 2 billion.
As you can see, there is still a lot work to be done here and it may be difficult to attain but entering this stock at this point in time may pay off in the long run. I personally own Jan 15 calls ($8 strike) and still believe that the company will turnaround and gain traction in 2014.

Disclosure: I do not receive any type of compensation from anyone for this blog/post. I am long JCP. Parts of the conference call transcript where obtained through Seeking Alpha 

Monday, November 18, 2013

Getting Ready for JC Penney's Earnings Release

It has been almost a year since I started following JC Penney and their turnaround effort. I have to admit that supporting them back then was just a little too early and I have paid the price, losing close to half of my original investment on shares of this company.

Having said that, I still think this company can and will be turned around. Though I still think some of the changes that Ron Johnson introduced are good for the company (e.g. uncluttered stores), It is also true that taking away the coupons were a major mistake that resulted in a precipitated decline on sales. Now that Mike Ullman is back on the reign and coupons have been reinstated I think customers will come back.

JC Penney is scheduled to release earnings this upcoming Wednesday, and based on the latest events and releases from the company, I expect it to give positive news that will give the stock a much needed boost and at the same time scare some short sellers away from it.

I will listen to the conference call and dig in the financials for signs of further improvement and a more robust thesis to back up my position on the company and post them here.

I am long JCP, own Jan '15 Calls 8. I do not work for JC Penney nor I receive any type of compensation for this blog from anyone.

Monday, November 11, 2013

Thank You Veterans!

I want to take this opportunity to thank all veterans of the United States military for their sacrifices and service to this great country. Without them, our freedom (which many don't even think of) will not be possible. Also, thanks to all the veterans families, friends and relatives who also had to endure watching their loved ones go away for some time and in some cases forever.

It is only fair that we take the time to remember and honor those who have risked everything and in some cases lost so much in order for all of us to enjoy our freedom.

Dear Readers!

Please take the time to say thanks to a veteran today! It is important for them to know we care and appreciate what they did.

Adrian Gomez.

Thursday, November 7, 2013

Adding Some Oil To My Holdings

Energy is a need for humanity, and oil companies have been in the front lines benefiting from covering this need. So, how can I get a piece of it?

Swift Energy Co. (NYSE: SFY)

This company is a small player in the oil  and natural gas industry but with huge potential to make my investment double in a relative short period of time. Swift Energy Co. had been on the wrong side of the industry, they were playing mainly on the natural gas (NG) and natural gas liquids (NGL). Now, with more and more operations on the Eagle Ford Shale they are becoming an oil company and moving away from the not so lucrative natural gas industry (as stated on their latest quarterly results). This move is expected to materialize on the next few months.

Although Swift's balance sheet is not very healthy with a current debt higher than the current assets and virtually no cash on hand. I still believe that it has the means to navigate through this transition. Once the sale of their Louisiana assets (which are mainly natural gas producers) gets completed and the operations on the Eagle Ford Shale (mainly oil producing wells) are reflected in the upcoming quarters we will be able to see the stock of this company go at least to book value of $24.71 as of 3Q2013 (right now is trading at about $14 per share).

Adding to my thesis, Terry Swift, the company's Founder and CEO has made recent purchases of the stock on the open market. There may only be 25,000 shares between 8/5 and 11/4 of the present year but remember; while there are many reasons for an insider to sell a stock (tax related, estate planning, etc) there is only one reason to buy, and that is to make money!

In my opinion, this stock is being treated as a "natural gas" company and investors are still overlooking the fact that they are shifting away from natural gas and will become an "oil" player in the next few months. Though I will not put all my money into this stock I will certainly give it a space in my portfolio.

Tuesday, January 22, 2013

Facebook Ahead of Earnings!

For some investors it may seem like a scary thing to get into Facebook’s (NASDAQ: FB) stock right now, and who can blame them right? I mean, the stock has appreciated some 52% from $19.50 on Oct 23, 2012 a day before the 3Q12 earnings release to $29.66 as of Jan 18, 2013, while others, are still very optimistic about the future for this young company. 

I have written on two other occasions about the prospects for this company and the future of the stock ahead (those of you who want to read the full reports please visit my personal blog and just look for the articles on the right side), and it looks to me as a still great opportunity to jump in, here’s a recap:

Revenue - It has been consistently increasing over the last 9 quarters at a compounded rate of about 13% sequentially, but decreased over the last 4 quarters to a rate of 3.5%

Costs and Expenses – The Company should start delivering improvements in this area, during 2012 they recognized a huge portion of their RSU’s (Restricted Stock Units) causing a big impact on the bottom line and more specific during the 3Q12 and it is now expected to get back to normal levels.

Monthly Active Users (MAU’s) – A very important metric for Facebook, it has consistently increased to a nice 1,007 million, as reported on the last earnings call. This number, in my opinion, will be maintained if not improved during this quarter with no signs of deterioration.  Google+, the social site of Google (NASDAQ: GOOG) has been improving over the last few months, in terms of users, but not as much to represent a dent in Facebook’s user base at least yet. 

Average Revenue Per User (ARPU) – Another important metric, and one I expect to be improved this quarter (4Q12) given the fact that mobile monetization was in full display and many products targeting mobile users were rolled out over the last few months. I have said before that at least $1.40 but now I think it can hit $1.50.

Cash on Hand – Having more cash available than their entire debt is certainly a good factor for Facebook’s management team, giving them room to work on what matters for them and investors and not spending time on managing debt.

Products – There are now several money making products where the Company relies on to bring in revenue. Though we may know the name of the products, the truth is that we don’t know if they will ever breakdown the amount of revenue each generates. However, it is important to stay up to date with most of them to get a sense of what’s going on.

Gifts, for example, is one of the products I believe will take off eventually. Although right now I haven’t seen many people using this feature, it may be just a matter of time for this to catch up. I have used it and I am very satisfied with it.

In the most recent press release, Zuckerberg talked about a new product, “graph search” a way to know better your friends and surroundings. This new product and the “nearby” feature are competing with Yelp (NYSE: YELP), not only you can see what others think or say about certain business but get more trustworthy reviews when coming from people you actually know.

With all the information Facebook possesses from its users and the constant interaction users have with each other on the site, this social platform is getting content richer and stronger every day. I won’t be surprised if one day Facebook becomes the ultimate marketing company, after all, marketing companies where using “bulk” information on customer groups, now it is becoming more and more specific getting to a point where an add may be tailored just to one person.

Facebook should be releasing their latest earnings reports on Jan 31, 2013 and with it I expect the stock climb and continue its upward trend, at least in the near future.

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Friday, January 18, 2013

Deckers Signaled Growth at the ICR XChange Conference

On January 17th 2013, Deckers (NASDAQ: DECK) participated in the 15th annual ICR XChange conference in Miami, Florida. There, Mr. Zohar, Chief Operating Officer gave the presentation and several pieces of information are worth mentioning. So, here is a recap of that conference.

Brand Portfolio.

The company gave us a breakdown on the sales and what percentage is attributable to each of the brands they carry.

·         UGG Australia           84%     -Decreased from 87% on 2011.
·         Teva.                          9%       -Reaccelerated on the 3rd quarter (growth of 21.8% y-o-y)
·         Sanuk                         6%       -Showed a 17% growth y-o-y on its first comparable quarter
·         Other                          1%       -Ahnu, Tsubo, Mozo & Hoka.

One thing I noted while reviewing their 3Q12 income statement once again, was the fact that overall revenues showed signs of improving. While in 2011 Deckers reported 1,377M on revenue, if we take a look at their last twelve months, this number shows an increase of 1.7% for a total of 1,401M.

2012 a Challenging Year.

Mr. Zohar continued the presentation reviewing what the year 2012 meant for Deckers. He noted that weather – being warmer than average – had an impact on the business. Also, he noted that the macroeconomic conditions in Europe played an important role on the sales in that part of the world. Sheepskin (a key component of the UGG boots, the main source of income) costs increased significantly, therefore, putting pressure on margins.

This is not new, management has been telling us this for a while now, and as a matter of fact that was the reason they kept lowering guidance during 2012. However, I do believe that a shift to that trend is happening right now. A Business Insider article by Kim Bhasin noted that the hottest product that shoppers were looking for during Thanksgiving holiday was in fact the UGG boots, and the results of that, has yet to be released on the next earnings report.

Weather, this small-yet-important factor, is also playing in favor of Deckers. At least in the United States, colder temperatures have been registered during the last couple of months, making the UGG boots more appealing than they were 6 months ago. This can also translate into higher sales for this 4th quarter 2012 and 1st quarter 2013.

Sheepskin costs will be lower for this 2013. Mr. Zohar said on the conference that prices of sheepskin have been locked at an 11% reduction compared to 2012. With this, margins will be wider, affecting positively the bottom line.

International Markets.

Though Europe is still struggling with the macroeconomic conditions, the company gave two good indicators of international presence and growth; Asia, Japan sales, to be more specific, grew 80% from a year ago putting Japan as the #3 market for Deckers. China also showed improvement of 70% from 2011 placing the People’s Republic of China as the 4th biggest market.

Store Count.

In my opinion, here is where the real profit for the company will come in the next couple of years. Deckers opened 30 new stores in during 2012 bringing the total store count to 77, that’s an increase of 63% in one year. Sales per square foot is averaging $1,700.00, that is pretty much in line with Coach (NYSE: COH) with $1,824 per square foot - according to Kim Peterson in an article published in 2012 - and roughly 55% of what Tiffany (NYSE: TIF) is doing - $3,085 per square foot .

That alone, is no indicative of the future performance of Deckers, but, if we consider that the company plans to have 200 stores by 2014 and that, as per Mr. Zohar, marketing campaigns budget increased to 5% from sales compared to a 4% from previous year, we can then get an idea to where the company is heading with its retail stores.

Deckers is diversifying to other products as well. Handbags, accessories and apparel are some examples of the items they are promoting in order to bring the company into a year round business and not only winter concentrated. The Sanuk brand for example, is a sports action brand targeting young individuals. This brand competes directly with Sperry Top-Sider owned by Wolverine World Wide (NYSE: WWW) and with crocs loafers which of course is a trademark of Crocs (NASDAQ: CROX).

There’s still more road to be covered by Deckers and its management team before investors realize that a positive shift in the company has occurred, but this can give us a good indication that things are improving.

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