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philtmcnasty8 32 posts  |  Last Activity: Oct 30, 2014 11:47 AM Member since: Mar 27, 2004
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  • Reply to

    Probability of bankruptcy

    by carol88888 Oct 29, 2014 5:55 PM
    philtmcnasty8 philtmcnasty8 Oct 30, 2014 11:47 AM Flag

    How/where did you get 48%?

  • Reply to

    A bear case for HD

    by philtmcnasty8 Oct 25, 2014 3:43 PM
    philtmcnasty8 philtmcnasty8 Oct 27, 2014 12:53 PM Flag

    Clearly not the same business model or industry but both have levered up balance sheet to pay for share buybacks at what is likely to be the top of the market. Its one thing to use excess cash from operations to buy back stock, particularly if it is undervalued stock. Its quite another to borrow money (debt has doubled in the last few years) to fund share purchases at 20 x earnings when sales are growing slowly and margins have likely peaked.

    Demographics are also against them as huge boomer contingent enters their 60s. How many seniors take on home renovation projects? Also student debt competes with mortgage debt so we are likely to see less new homes and less refinancing to fund renovations among younger folk.

    They will enter the next slow down / recession with a much higher debt load than the last time. Given the low interest terms debt they will not be at risk but will have considerably less flexibility.

  • philtmcnasty8 by philtmcnasty8 Oct 25, 2014 3:43 PM Flag

    Thought I would put out my bear case for HD and would welcome counter arguments as I'm trying to determine if the case is strong enough to short the stock:

    1. At 22 the PE ratio is that of a company with strong growth. While earnings per share have been growing nicely the last few years, that has been largely attributable to levering up the balance sheet with low cost debt while buying back ever more expensive shares. Revenue has been growing at a very modest 5-6% and rarely do earnings grow faster than revenue for an extended period of time. I believe revenue growth is a better indicator of growth potential and at 5% that gives HD a very expensive PEG ratio of around 4.

    2. HD is tied at the hips to the housing market and the latest indicators have not been great. Home builder confidence dropped recently, coinciding with the soon to end FED purchases of MBS. It seems like the housing market wilts every time there is a hint of higher mortgage rates. Record high student debts also does not bode well for the future of housing recovery as buying home and taking on mortgage will be put off until debts are paid off.

    3. I find the massive bond issues in the last couple of years particularly worrisome. A quick look at 3 years of balance sheets makes it clear that most of those funds were used to repurchase shares. While that might have made some sense at first, with the share price at $30, it looks like an increasingly poor use of funds at the moment. And they are promising another $3.5B in buy backs in H2.

    4. Look no further then IBM for a poster child of where that kind of financial engineering can lead. IBM has had flat sales growth and did the same thing to boost EPS. It worked for awhile and the stock went up but it finally caught up with them last Q and the stock took a nose dive.

    It's hard to tell where HD is in this process. It could continue to go up for awhile as long as EPS keeps growing but is likely headed for a fall soon.

  • Reply to

    Back In A Big Way!

    by eyt_trub Oct 23, 2014 4:01 PM
    philtmcnasty8 philtmcnasty8 Oct 23, 2014 5:11 PM Flag

    I never thought of it that way. Gives an interesting perspective of just how far it has fallen. Total market cap now less than 1/2 the value of Red Back deal. And they are selling FDN to the same guy (Lundin) that sold them Tasiast. Now that's funny!

  • Reply to

    KGC and FDN

    by ag_spoon Oct 23, 2014 12:27 PM
    philtmcnasty8 philtmcnasty8 Oct 23, 2014 12:52 PM Flag

    No doubt about it, their acquisition and now divestiture record of late is atrocious. However the news of FDN write off came some time ago and at the time there was little hope of any recovery. The stock price reflected that news at the time. There was also little bounce after rumor of potential sale came out. So the nickles on the dollar they got was found money. I was really surprised the stock didn't get some bounce on that news.

    The price of gold does not need to go up, it just needs to stabilize where it is today and they can make a decent profit. Gold miners need geologist/engineer at the helm. The ill-fated acquisitions for Kinross all happened under the watch of a former banker who lived for "the deal".

  • philtmcnasty8 philtmcnasty8 Oct 23, 2014 10:46 AM Flag

    I think that ratio will be permanently lower due to the introduction gold ETFs. For much of that 25 year period the gold miners carried a premium to other stocks because it was an easy way for investors to gain exposure to gold without having to keep bullion in their home. With the introduction of gold ETFs I believe that premium has permanently disappeared. Having said that I think the ratio deserves to be higher than it is now and gold miners will outperform the metal as soon as it stops dropping.

  • philtmcnasty8 philtmcnasty8 Oct 23, 2014 9:56 AM Flag

    You're forgetting that Kinross completely wrote that investment off and the stock was rightly punished as a result. The share price has been heading lower relentlessly despite a moderately higher gold price recently and steadily improving operating costs so its hard to imagine there was a potential takeover premium built into the shares as you suggest.

  • Reply to

    why the devastation in the miner sector

    by dumpplatinum Oct 22, 2014 3:36 PM
    philtmcnasty8 philtmcnasty8 Oct 22, 2014 5:20 PM Flag

    Fear of deflation will bring more central bank intervention which should support gold, at least relative to other commodities. This is good for miners as costs should drop greater than POG. On balance QE was a positive for gold price as it went from $800 before QE was introduced to $1240 today.

  • Reply to

    Gold stocks are going in bankrupt

    by A Yahoo! User Dec 31, 1969 7:00 PM
    philtmcnasty8 philtmcnasty8 Oct 22, 2014 4:10 PM Flag

    They're certainly trading like bankruptcy is just around the corner. Most aren't even close though - still lots of room to cut capital spending & exploration, operating costs have been coming down too and will continue to as we see benefit of lower oil prices in Q4.

  • philtmcnasty8 philtmcnasty8 Oct 22, 2014 4:06 PM Flag

    I hear ya, it is frustrating. Most are convinced gold is headed lower in the near term. Even some staunch bulls have conceded it could still go lower. If they're right, the temporary bounce higher in the metal won't do the miners much good. In the past the miners have preceded the gold price lower - not sure it will be the case this time though. There's an awful lot of bearishness out there. Mind you I thought we had seen capitulation selling last year. It's hard to tell how much more there is to go.

  • Reply to

    FDN Sale?

    by tikas2709 Oct 21, 2014 7:40 PM
    philtmcnasty8 philtmcnasty8 Oct 22, 2014 9:46 AM Flag

    Truly astounded by today's opening! This is found money. The asset was carried at $0 and its not like the stock went up on the earlier rumor of sale so you can't argue that a deal was priced in.

  • Reply to

    what is the issue with this flipping stock?

    by tikas2709 Oct 21, 2014 12:15 PM
    philtmcnasty8 philtmcnasty8 Oct 21, 2014 8:23 PM Flag

    According to Globe and Mail short position was 31M as of Oct 15, or about 3%. That's probably only on TSX. I'm guessing Ameritrade number may be on US market only.

  • Reply to

    FDN Sale?

    by tikas2709 Oct 21, 2014 7:40 PM
    philtmcnasty8 philtmcnasty8 Oct 21, 2014 8:07 PM Flag

    Good news. There was some conjecture on this transaction so not a complete surprise but it's hard to image the sale was priced in given the rock bottom price to which Kinross has fallen. FDN was completely written off so the sale price goes straight to the bottom line - worth about $0.20 a share.

  • philtmcnasty8 by philtmcnasty8 Oct 21, 2014 6:58 PM Flag

    May finally catch a bid tomorrow with this news.
    Although Lundin is getting a sweet deal here. Pretty ironic that the same guy that sold Kinross Tasiast at the top of the market is now buying FDN at the bottom??

  • Reply to

    Gold rallied $60+

    by chairman1600 Oct 20, 2014 10:06 AM
    philtmcnasty8 philtmcnasty8 Oct 20, 2014 1:31 PM Flag

    Maybe a good thing.
    I see Goldman Sachs lowered there interest rate forecast today. Higher rates has been key to their commodity specialist Currie's bearish call on gold. Lets see if this change has him revise his gold forecast.

  • Reply to

    Cost of crude and GDX

    by gombaysmash2000 Oct 15, 2014 12:27 PM
    philtmcnasty8 philtmcnasty8 Oct 15, 2014 2:37 PM Flag

    It certainly should. If oil stays down, diesel will follow and so will one of the miners' biggest costs. If gold price only stays flat, miner margins will rise.

  • Reply to

    Testing 1224 in Asia

    by chairman1600 Oct 14, 2014 9:53 PM
    philtmcnasty8 philtmcnasty8 Oct 15, 2014 9:16 AM Flag

    I've been struggling with the idea of selling some miners on a bounce but have never been very good at market timing so have resisted the urge. The more I think about it the more it makes sense to me to own gold miners with mines outside the US. There's a lot of talk these days about how bad the price chart of gold looks from a technical perspective, but if you look at the charts in most currencies not pegged to the US dollar its actually not that bad. Gold has not revisited December lows and has been trending higher in Euro & Yen. With oil and diesel prices plunging, costs in USD for a mine in Europe, West Africa or even Canada for example should drop significantly. Barring an absolutely collapse of gold price, these miners should do ok. I doubt much of that is currently priced in

  • Reply to

    "Bloodbath"???

    by philtmcnasty8 Oct 13, 2014 11:06 AM
    philtmcnasty8 philtmcnasty8 Oct 13, 2014 11:07 AM Flag

    This market badly needs to be reminded what a bloodbath really looks like.

  • philtmcnasty8 by philtmcnasty8 Oct 13, 2014 11:06 AM Flag

    I'm seeing this word used liberally to describe last week's market declines. If that was a bloodbath pundits have a very short memory. The S&P dropped roughly 3% over the 5 days! Hardly a bloodbath and hardly cause to declare the market oversold and due for a bounce.

  • Reply to

    What is the hell going on with GDX

    by marty81274 Oct 10, 2014 3:41 PM
    philtmcnasty8 philtmcnasty8 Oct 10, 2014 4:08 PM Flag

    It is especially disconcerting to see it drop more than the market averages, after it mostly went down while stock market went up for past 2-3 years. GDX seems to get particularly volatile when gold is near costs of production, as mines with costs above the price of gold are essentially worth $0. There also seems to be a general consensus that gold is heading lower sooner or later, so short-term rallies in gold price may not be reflected in GDX.

    My own take is that the consensus is more often wrong and we may be at or near the bottom for gold equities. Mining costs are coming down and recent drop in oil should help. If gold can only stabilize that will be enough for GDX to go up. Also early stage of market correction is likely to see people moving to cash before looking for alternatives like gold.

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