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Garmin Ltd. Message Board

  • i_observe_smt i_observe_smt Apr 7, 2008 2:55 PM Flag

    open message to intelligent shorts (including spoiler)

    Folks, GRMN is taking a beating from shorts right now. Many shorts out there who don't read this board have absolutely no idea about Garmin business, and instead, just response to a call from their news letter to short Garmin at $54.

    But there are some shorts who I call intelligent shorts that have invested sometime into Garmin. I don't understand why they do not see the potential as longs see. Maybe it is because of doom and gloom mentality of shorts that cloud their thoughts. But I think intelligent shorts, who has argument and reasoning, are not moron. They just try to make money, the same as longs are trying to make money, though their method and motivation is questionable and incomprehensible to long investors.

    But they are intelligent in the sense that they do analysis (no matter how flaw it is). Rob Sanderson is one. Spoiler on this board is another. Spoiler said he is a CPA (which I assume CPA stands for Certified Practice Accountant?)

    Even though your attitude is different for GRMN, I call for intelligent shorts to put some constructive resources to this board instead of pure nonsense bashing. Spoiler posting on Accelerated Growth or price war are certainly informative.

    So my challenge to intelligent shorts is use their knowledge and skills to provide us longs an analysis on Garmin, instead of just talking vague and psychology: it is a decline, competition increasing. We longs are numbers and details junkie.

    We agree with you shorts that margin will decline (btw, Garmin said that every quarter). We agree that competition will increase. We agree with you shorts.

    But we want numbers. So I challenge intelligent shorts, spolier in particular, to provide us with NUMBERS.

    Let say: "assume this x percent of margin, this y percent of sale increase, this z cost, then EPS for 2008 and 2009 will be this much. And that is this much increase/decrease. This is margin for Auto, this is margin and volume for aviation/fitness/marine, and so this is the number".

    Spoiler, you are a CPA, and I think if you use ridiculous number, such as total sale will be flat, then you will undermine your credibility.

    Larry provides us with his number. Unfortunately, he is a long and his number is often rosy (while still true most of the time) and he tells us Q1 will be .80+ ! I don't believe that 80c number by Larry.

    So if shorts can provide us with a number, say 75, we can confidently say that is the lowest on EPS, don't you think?

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    • i_observe,

      I'll be honest. I don't maintain a running model where I have plugged in the growth rate by each product line, the margins, the SG&A expense, the tax rate, etc. Though, I have done this before for many of my long term holdings. I start off from the macro-economic picture and work myself down.

      It is no surprise to me that PEs of all consumer discretionary stocks started dropping last fall. Can anyone explain this by looking at SEC filings? No. Because it has to do with market sentiment which is not explained in SEC filings. Smartest longs just walk away from consumer discretionary names as soon as they get the slightest hint of economic softness even if the company continues to beat estimates. You can spend hours and days using your accounting/finance skills trying to explain the logic for drop in stock price and PE, but you'll never get the answer. I saw this coming. I didn't need a thousand punches in my calculator to forecast the drop in share price. I shorted Garmin at $114 and covered at $75.

      Now the story is margin compression while we're still under economic headwind. Market is craving for growth. The BIG MONEY would rather pay a premium for stable low growth than high-risk volatile growth. Capital preservation is more important than aggression until the economy turns around. Unfortunately, with Garmin wrestling with margin compression, the BIG MONEY just doesn't give a damn.

      Think of stocks as pieces of paper and the big money setting up supply/demand for those pieces of paper regardless of the fundamentals. Play the sentiment. You could be right, but still be wrong for so long that it will break you. But if you want to be Warren Buffet, then for God's sake don't buy Garmin. Buffet would never buy Garmin or any other consumer discretionary stock in a falling economy. Stick with Coca-Cola and other secular growth stock. Then you don't have to worry about the sentiment.

      • 2 Replies to spoiler79
      • spoiler: "I'll be honest. I don't maintain a running model where I have plugged in the growth rate by each product line, the margins, the SG&A expense, the tax rate, etc. Though, I have done this before for many of my long term holdings. I start off from the macro-economic picture and work myself down."

        So we should never take spoiler target, say GRMN will go to x or GRMN ASP is y seriously because he doesn't want to talk number about GRMN. We can discuss vague and trend instead. That's fine.

        But longs shouldn't take any numbers from bashers/shorts seriously because spolier, a CPA, doesn't have the number for Garmin.

      • But your hole assumption is based on a continuing falling economy. Even Bernanke is hinting toward a growth the 2nd half of this year based on the fact that the interest rate cuts typically show their effect 6 months after policy change and the rebate checks going out the door next month. Let's hope some of these rebates go towards these naviation units.
        History has proven GRMN continues to perform in good and bad times, and I agree with the earlier statement that GRMN is focuse on being best of breed. It's almost as if I'm looking at Apple in 2003. Everyone was saying the increase compeition and lack of product loyality is going to kill Apple, but who was wrong?? (Shorts again). I bought in aroung 58.50 and am expecting 15% year/over year for the next 3-5 years.

        And for the record, I can't bring myself to short a stock... I'll simply sell or not buy if the fundamentals aren't there. In my opinion, it's almost unAmerican to short stocks.... unless of course youre a pinko commie living within! yeah, yeah, I know...some will now go on how capitalizism is a greed engine that takes no names, but it's original definion definately does not flip the bill of a short's take on life.

    • If you want to be cynical about this.

      The market is massively undervaluing Garmin. Right now Garmin is trading not at 14 PE, but 11.77 forward PE.

      So say Garmin does make 4.48 (not 4.40) as that is consensus. Then that is a 16% growth, meaning at least a 16 PE, which puts Garmin at around 71.84...

      In other words undervalued folks...

    • lucky,

      here you go.

      1. We can also pull the number from yahoo, instead of using Larry number. But this is the Yahoo board!

      You are missing my point, lucky. While the actual number is more or less relevant (same as Larry's number), I try to establish a common ground to discussion with intelligent shorts (like bear/bull rebuttal of Motley fools). Something more concrete rather than bashing shorts/bashing longs.

      2. You made the same mistake as shorts. You wrote "they have predicted 4.40 for the YEAR". What they said is, quoted, "We anticipate overall revenue to exceed $4.5 billion in 2008, and earnings per share to exceed
      $4.40 assuming an effective tax rate of approximately 12 percent."

      That is GARMIN exact words, cut and paste, look at Q4 earning release on Garmin website.

      So what they mean is that they expect that EPS is at least 4.4 (earnings per share to exceed $4.40), not exactly 4.4

      And if you follow Garmin, they provide lower bound on estimate every year, for 7 years! That is their practice. And they beat the estimate every year, for 7 years (which is like a century in investing).

      Even with 4.4 number, the math is (4.4-3.8)/3.8 = 18%, not 16% like you said.

      With 18%, using 1.2 PEG, then the PE should be 20+.

      "however , since garmin seems to live and die by the numbers, hopefully q1 will be better than rauckman warned, and they can INCREASE their end of year forecast up to closer to 5.50 to earn better than a 14 p/e...imho lucky "

      The point is the shorts is manipulating GRMN unjustified.

      so right now GRMN deserve 20 PE and should get 30PE when they actually increase estimate.

      Yet, they give GRMN 14 PE. And if GRMN increase estimate by year end, they may get 20 PE. That is instead of 20-30 range.

      The shorts seem to convince you that 14 PE is OK. That PE is not OK. That number comes out of no where so the first thing is to get them back to number and see what their assumption is.

    • Maybe there are two types of investors that actually share a common short term view. Shorts believe that GPS is a commodity and margins will continue to decline as well as the rate of growth in sales. Longer term they think that Garmin's applications will become the "Bayer" version of aspirin in the GPS world.

      Longs agree the market is becomming more competitive and that margins will decline as well as the rate of revenue growth. They see a different future in terms of GPS applications. They see a company with a focus and a determination to be the best in the industry. They see an industry that is unfolding with opportunities that I personally hope are actually there. In the long run shorts believe Garmin is Bayer, Longs believe Garmin is Garmin.

      In a nutshell, I think traders that aren't afraid to take short positions can do very well with Garmin. I don't have the stomach for the volatility and will wait for the longer term payoff that will come if Garmin is more than aspirin.

    • They must be crunching numbers???

      • 1 Reply to kunes703
      • kunes703:

        First, some shorts are
        intelligent in the sense that they understand numbers and they understand business. So not all shorts are dumb or rude.

        I don't understand why they got into short and I don't intend to know. From my own experience, sometime it is really a nonsense thing. Like once I bought a stock, I lost money on the stock, and later found out the management is crook, I really hate that stock.

        People like spoiler here are posting negative about Garmin. If he has no past experience with Garmin, then why he waste his time visiting Garmin board constantly? Either he shorts or if he don't, he has some bad vibe about Garmin because Garmin management and Garmin business are just flawless.
        Since he is intelligent, I less incline to think he is shorting at 50.

        Some may question their motive. Rob Sanderson is an analyst. Spoiler is a CPA. They do think numbers. Spolier even quoted GRMN growth rate is 18% recently. If his number is wrong, we can help point it out.

        Intelligent shorts do use evaluation/number as long when shorting and they short bloated companies with high PE.

        Longs, rate my message if you agree with my post.

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