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Skullcandy, Inc. Message Board

deanmortensen 130 posts  |  Last Activity: Aug 31, 2015 3:01 PM Member since: Feb 15, 2009
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  • ...MIND C.T.I. is a stock that benefits from a strengthening dollar. Most of MIND's revenues (59% in 2Q) are in U.S. dollars, but most of its operating expenses are in weaker foreign currencies, such as the Israeli Shekel, and the Romanian Leu. MNDO pays a 30 cent annual dividend, giving it a dividend yield of over 10%. The stock has 89 cents/share of cash on its debt-free balance sheet. CEO Monica Iancu owns 17.28% of the outstanding shares, indicating that management and shareholder interests are aligned.

    Sentiment: Buy

  • HIHO sports $2.46 of cash/share on its debt-free balance sheet. (Believe it or not: Cash/share comprises over half of the stock price.) HIHO pays a 40 cents/share annual dividend. HIHO benefits from the recent devaluation of the Chinese yuan, because most of HIHO's manufacturing operations are in PRC. HIHO's unique competitive advantage is that it owns a 75% interest in a manufacturing and assembly facility located in Yangon, Myanmar, where labor costs are among the lowest in the world. HIHO has been transferring assembly jobs that require a lot of manual assembly from PRC to the Myanmar facility. After shedding its low margin manufacturing contracts, HIHO is seeing rising margins and profit. Management owns a significant share stake in HIHO, so management and shareholder interests are aligned. In short, HIHO is a value stock with growth characteristics well positioned to continue to report rising revenue and profit in coming quarters. What's not to like?

    Sentiment: Strong Buy

  • deanmortensen deanmortensen Aug 28, 2015 2:56 PM Flag

    I believe there is a linkage between the Shanghai and Shenzen stock exchanges and the real economy in China. Trillions of dollars of wealth have been destroyed since June. It's unlikely that won't have an impact on domestic spending. The stock rout will also hamper companies' ability to raise money through equity sales. B of A said today that as soon as the Chinese government stops propping up the stock market, it will resume its slide. China stocks are still way overvalued on a fundamental basis. The P/E of the S&P 500 is about 20. In China, the P/E of the Shanghai exchange is 38. With the China economy cooling, Chinese stocks are still very expensive. The only reason the P/E got so high is because the government encourged people to buy stocks, and because China is basically a closed system in that Chinese investors aren't allowed to convert their yuan into other currencies or buy stocks in markets outside China. That's why I think stock prices in China aren't in equilibrium with stock prices elsewhere. If the Chinese authorities allow Chinese investors to sell and to move money offshore, there will be a flood of capital leaving China.

  • ...in China's stock market. Basically, NTP has been insulated from the selloff that has impacted other China-related stocks. China's economy is characterized by a lack of transparency, and many economists doubt China's GDP is 7%, because other indicators like electricity consumption and transportation indexes suggest the actual number is lower. It isn't clear Chinese authorities will be able to bolster flagging growth. China exports plunged 8% in July. China domestic stocks are still way overvalued in comparison with stocks in the U.S. and other countries. Could the same be true of China commercial real estate? Chinese authorities' efforts to stop stock prices from adjusting downward are akin to trying to make water flow uphill. The government has already spent $485 billion buying stocks in a frantic effort to prop up the market. If the stock selloff turns into a panicky rout, that money could go "Poof!" rather quickly. Chinese leaders encouraged small investors to buy stock, leading to a massive bubble in stock prices. Now that the bubble has burst, their credibility is on the line. Public confidence in China's leaders has already been dented badly by their apparent attempt to inflate a bubble in stocks, followed by a stock market plunge and a desperate effort by authorities to stem the meltdown. The authorities appear to be incompetent, and have placed themselves at the whim of a panicky stock market.

  • deanmortensen deanmortensen Aug 25, 2015 11:32 AM Flag

    PGN has a huge pile of cash from its Prospector refinance. It's more than enough to push the price up above $1 and keep it there.

  • deanmortensen deanmortensen Aug 25, 2015 10:45 AM Flag

    So far, nothing the Chinese authorities have done to stabilize the economy has worked. Their heavy-handed intervention in the stock market has failed to stop the meltdown. Confidence in Chinese authorities to manage their economy has been severely damaged. The China economy continues to worsen.

  • deanmortensen deanmortensen Aug 21, 2015 2:05 PM Flag

    What about institutional investors? Often when a stock price dips, the institutions dump it just to get it off of their books so they won't have to report it to shareholders. This is known as "window dressing". Some stockholders sell when a stock drops 50%+ just to take a tax loss. We don't know what hedge funds are doing, but it's likely many institutional holders are selling. Look, if you were a mutual fund manager who owns shares of RYAM, would you want to list those shareholdings in your quarterly report to fund shareholders? And, would you want to field questions from fund shareholders about why you bought RYAM stock, and why you are continuing to hold the shares after it dropped over 50%? Most fund managers would rather dump the stock and be done with it just to avoid embarrassment.

  • deanmortensen deanmortensen Aug 21, 2015 11:43 AM Flag

    I'm a buyer here. My take is that Eastman wants to lock up a reliable domestic supplier of CS, so Eastman executed a multi-year supply agreement with RYAM to that end. But now Eastman wants to shop around for lower priced CS from foreign suppliers, and if the new suppliers don't work out, Eastman thinks it can fall back on RYAM. The trouble for Eastman is it can't have it both ways. Eastman locked up a large portion of RYAM's capacity with a supply agreement that runs through 2018. Meantime it is qualifying foreign suppliers, and threatening RYAM that it will pull the plug on its agreement if RYAM doesn't drop its price. I don't think Eastman really wants to go with a foreign supplier to replace RYAM as its main supplier of CS. Eastman is just trying to to pressure RYAM to drop the price. Eastman is trying to have the security of a supply contract with RYAM, and also the ability to get the lowest available global spot market price, but you can't have it both ways.

  • ...which is why Eastman wants to get out of its supply contract with RYAM. Eastman has been pushing RYAM to negotiate down its prices, but RYAM is resisting. The supply contract runs through 2018. Sometimes parties to a business contract who want out resort to legal action in the hope of breaking the contract. It's probably best for the courts to resolve the dispute between Eastman and RYAM. I hope a timely resolution will end the distraction to both companies, and provide clarity to investors. Fortunately, the dispute mainly concerns the interpretation of contract language, so it should be a fairly straightforward issue for the court to decide. I tend to see this situation as a commercial contract dispute, which is a common situation in business. Here in the U.S., the courts uphold the sanctity of contracts, which actually allows U.S. business to function with more predictability and certainty. It is the proper role of the courts to rule based on the facts in the case and to facilitate a resolution.

  • Reply to

    This should not take a judge very long to decide.

    by weege2 Aug 19, 2015 4:50 PM
    deanmortensen deanmortensen Aug 19, 2015 8:59 PM Flag

    weege2, again I have to agree with you. Even if RYAM had lost the lawsuit filed by Eastman, it's very doubtful that equates to a loss of 50% of RYAM's equity capitalization. In this case, the outcome of the court case is unknown, so the 50% haircut is way overdone.

  • Reply to

    This should not take a judge very long to decide.

    by weege2 Aug 19, 2015 4:50 PM
    deanmortensen deanmortensen Aug 19, 2015 5:42 PM Flag

    weege2, I agree. The judge will be making a technical call based on the contract language. I'm not sure what "past practice" has to do with it, but RYAM thinks it bolsters its case. I'd be surprised if there is a loophole or defect in the agreement that gives Eastman a way out. The agreement is a very important agreement, and RYAM has had lots of experience in formulating such supply agreements, so it would be quite surprising if the agreement won't stand up in court. If the agreement isn't airtight, the Chief Legal Counsel should go.

  • deanmortensen by deanmortensen Aug 19, 2015 3:09 PM Flag

    I give Eastman Chemical an "E" for effort. Eastman is trying to change its existing supply contract with RYAM, which runs through 2018, by filing a legal action in Tennessee. I don't blame Eastman for trying to change the contract pricing, because prices of cellulosic fiber has slumped since the agreement was signed a few years ago. Still, it's likely the agreement is valid and legally defensible, and the statement RYAM issued today shows that RYAM management feels Eastman's legal action won't succeed. Looking at the big picture, I think it unlikely that Eastman will get anywhere in court, unless there is some glaring legal defect in the contract. That is unlikely to be the case for such an important contract which exceeded 30% of RYAM's sales of cellulosic fiber in 2014. Eastman has been trying to renegotiate the terms of the contract with RYAM, but RYAM has resisted making the changes Eastman wants, for obvious reasons. Eastman executed a legal contract with RYAM, and RYAM is not obligated to change the terms of the contract simply because the price of cellulosic fiber has sagged. Eastman is just pulling at straws in attempting to challenge the contract in court. I'm guessing their court challenge goes nowhere.

  • Reply to

    Maybe judge will rule for Rayonier

    by sharksandwich83 Aug 19, 2015 12:43 PM
    deanmortensen deanmortensen Aug 19, 2015 1:03 PM Flag

    I'm guessing that prices of specialty cellulosic materials which RYAM supplies to Eastman have dropped like other commodities, so Eastman wants out of the supply contract. Eastman is taking a shot by filing this action in Tennessee, because it doesn't cost Eastman much to file it. Even if Eastman only has a 5% chance of gaining anything by pursuing this action, it's worth doing so, because it costs so little for Eastman to bring the action. Eastman has been trying to negotiate improved contract terms with RYAM with no success thus far, and Eastman hopes the legal action will put more pressure on RYAM. I doubt that approach will succeed in obtaining any improvement in contract terms for Eastman. The market has incorrectly assumed that the action filed by Eastman in Tennessee poses an existential threat to RYAM, which it does not. Eastman is locked into a supply agreement with RYAM which runs through 2018, and it has little chance of getting out of it.

  • deanmortensen deanmortensen Aug 19, 2015 12:55 PM Flag

    Eastman can't "just dump" RYAM--Eastman is in a supply contract with RYAM which runs through 2018. To "just dump" RYAM would constitute breach of contract.

  • Reply to

    PGN is a call option on higher oil prices

    by deanmortensen Aug 15, 2015 11:46 AM
    deanmortensen deanmortensen Aug 15, 2015 9:12 PM Flag

    Uh...actually the fleet has gotten younger with the addition of the two Prospector rigs.

  • Paragon Offshore will do fine if Brent averages $70/barrel over the long-term. $70 Brent will provide enough work for Paragon's rigs to sustain the balance sheet. So, it all depends on Saudi its OPEC partners. If OPEC is willing and able to meet or exceed rising global demand for oil at price points well under $70, then the future looks dark for PGN. But if OPEC needs oil to be at least $70 in order to increase production to meet rising demand, then PGN will be fine over the long-term.

  • Reply to

    Crazy idea but could work

    by alan74z Aug 14, 2015 1:29 PM
    deanmortensen deanmortensen Aug 14, 2015 8:56 PM Flag

    alan, I think your idea about PGN buying back its bond debt is intriguing. Although my sense is that the big holders of PGN's bonds aren't ready to sell right now in the 30-40 cents on the dollar range. But, that doesn't mean they won't ever be willing to sell in that range. The Prospector refinancing gives PGN a lot of optionality and financial flexibility. Maybe at some point one of the bondholders will decide he wants to cash out, and will approach PGN management. At that point, PGN management might be able to negotiate a private purchase of some bonds at an attractive price.

  • Reply to

    SA Article on NCT

    by casadipace77723 Aug 12, 2015 12:26 PM
    deanmortensen deanmortensen Aug 14, 2015 4:28 PM Flag

    casadipace: Sir, the answer to the question, "Where is Wes Edens taking NCT?" is as plain as the nose on your face, IMHO. But as you suggest I will keep it in a locked vault. Thanks for your sage advice.

  • Reply to

    IF VER was trading at the O multiples

    by cpataxweb Aug 14, 2015 10:07 AM
    deanmortensen deanmortensen Aug 14, 2015 12:17 PM Flag

    Agreed. But today, VER is viewed by the market sort of the same way a recovering alcoholic is viewed--with skepticism. VER is still viewed as the former ARCP, a Schorch entity, that was under a cloud of intentional accounting fraud and an aggressive acquisition strategy combined with an aggressive balance sheet. The new CEO is following the right playbook to rehabilitate the former ARCP, and to make a clean break with the past. He's following conservative financial principles, focusing on the balance sheet to reinstate an investment grade debt rating. As part of that process, he's culling the property portfolio to sell roughly $2 billion of non-core properties. He's working on rebuilding Cole Capital's sales channels. He's putting a big emphasis on implementing best practices in corporate governance to put the Schorsh era in the past and make a fresh start.

    CEO Rufano would no doubt sell Cole Capital today if he could get a fair price for it, but it wouldn't fetch much today with the sales channel having declined by 70%. I expect Rufano to eventually be successful in bringing back the Cole sales channel, and in ultimately selling Cole, since it doesn't fit with VER's identity as the largest net-leased property reit in the world. Shedding Cole will allow VER to trade at higher multiples of revenue and AFFO as a "pure play" property reit.

    I like Rufano's approach to follow a deliberate and steady course to right the ship, restore the investment grade debt rating, and ultimately get back in the good graces of analysts and investors, so VER stock will trade where it should be trading. It appears Rufano is doing all the right things in a very systematic and methodical way, with increased transparency, because the market doesn't like surprises. It may take a few years for Rufano to forge a new image and identity for VER, but it appears he's off to a sure-footed start.

  • Reply to

    yield is now 10.90%

    by ruswise Aug 13, 2015 9:47 AM
    deanmortensen deanmortensen Aug 13, 2015 1:24 PM Flag

    ruswise, I'm with you! I had 40% of my capital in NCT a few years ago. Now NRZ is my biggest position, but I liquidated some of my other positions recently, and NRF is now my second largest position. With long-term interest rates set to remain low for the foreseeable future, and CRE prices at or near historical highs (per article on the front page of today''s "Wall Street Journal"), the game board looks set for a successful "pure play" reit spinoff strategy. I am optimistic that Hamo's strategy of reit yield arbitrage will prove profitable to existing NRF investors. Once Hamo successfully executes a spinoff, NRF stock could get a nice boost as investors handicap the possibility of additional future spinoffs. Of course, that assumes the NRE spinoff goes off without a hitch. Currently, the stars appear to be aligned nicely with interest rates abnormally low, and extremely low yields on European office reits. The time to buy NRF is pre-NRE spinoff while NRF investors on this board are still complaining about management compensation and grumbling about the recent share price weakness. I'm not saying those concerns aren't legitimate, just that I see the NRE spinoff as a near-term catalyst for NRF. If the NRE spinoff goes according to plan, it's a major upside for NRF common holders.

SKUL
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