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Suntech Power Holdings Co. Ltd. Message Board

walt373 15 posts  |  Last Activity: Apr 22, 2015 3:16 PM Member since: Jan 14, 2010
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  • walt373 walt373 Apr 22, 2015 3:16 PM Flag

    It's something I wrote and I'm bullish on HLF.

  • walt373 walt373 Apr 22, 2015 12:44 PM Flag

    Imagine a simple example where a new member joins every quarter and buys 4000 vp. The sales time series would look like this: 4000, 4000, 4000, 4000. Then, after this rule change is implemented, forcing the distributors to instead buy 4000 vp over the next 4 quarters, the time series will look like this: 1000, 2000, 3000, 4000. The first few months show a big dip but the run-rate remains 4000 going forward. Look what happens to the growth rates: -75%, 100%, 50%, 33%. You get a big initial drop, then a burst of growth as sales recover.

  • I posted a blog just now on Seeking Alpha that discusses the recent rule changes. It's too long to post here and I can't post links, but if you want to read it, just google the title.

  • Reply to

    Earnings 2 weeks from today........

    by fluteman_greg Apr 21, 2015 12:41 PM
    walt373 walt373 Apr 21, 2015 1:27 PM Flag

    Do you even Excel, bro?

  • Reply to

    sl1capital is a CFA ?

    by deiryassin_caust Apr 20, 2015 12:22 PM
    walt373 walt373 Apr 20, 2015 8:50 PM Flag

    There are brilliant billionaire investors on both sides, pretty sure that's a more relevant achievement haha...

  • Reply to

    What happens after the MOASS?

    by kravin_somhead Apr 17, 2015 12:24 PM
    walt373 walt373 Apr 17, 2015 3:55 PM Flag

    Here's my gameplan for the FTC decision. First, if it's unambiguously bad, I'm just going to sell HLF, no questions asked.

    If FTC decision is good and it squeezes, I think technical analysis will be useful in the first few days/weeks to determine if the squeeze is still on. I'm usually not a technicals guy but in a short squeeze, fundamentals don't matter. If the stock is strong, don't sell. If you are short, be smart and panic first, cover immediately. You should probably swallow your pride and even just turn around and go long. Longs should add if they can afford it.

    The point is there is big money on both sides and the outcome is basically binary - pyramid scheme or not. One side will be wrong and all that money will need to exit. There's so much money that they won't be able to exit immediately, meaning the move should be strong and durable whichever way it goes.

    This might be too slow but one idea is to check the short interest. There's really no reason short interest should be in the 35% range if the FTC clears HLF. Watch as that drops back down to a more reasonable level. Until then, your downside is limited as shorts will cover on any dips.

  • Reply to

    What happens after the MOASS?

    by kravin_somhead Apr 17, 2015 12:24 PM
    walt373 walt373 Apr 17, 2015 3:36 PM Flag

    HLF is probably worth at least $70 if the FTC risk just went away today, and it's not too hard to get a valuation above $100 with a little improvement to the fundamentals. If an actual MOASS happened it would go way past that. When shorts are forced to cover and no shares are available, they will pay any price. Just name any 3-digit number - it's within the realm of possibility.

  • Reply to

    THE HERBALIFE SHORT CASE

    by biotekker Apr 14, 2015 7:41 PM
    walt373 walt373 Apr 16, 2015 2:07 PM Flag

    One thing you are missing, as most shorts do, is the return policy. Even if it's true that distributors are just buying product to obtain supervisor status, the product still eventually ends up in someone's hands. And what's happening to that product? It's either being consumed or returned. If it's consumed, then that's great since that is real demand and a real sale took place. If it's returned, the end customer gets 100% of their money back and all the distributors above them don't make money. For someone to actually be exploited requires them to not consume the product or return it for a full refund.

  • Reply to

    Look at the ten year chart . . .

    by kravin_somhead Apr 14, 2015 12:57 PM
    walt373 walt373 Apr 14, 2015 6:13 PM Flag

    Whether they did the buyback to squeeze the shorts doesn't really matter. The outcome is the same. HLF bought an asset for a certain price, the asset being their own stock and the price being $60 or whatever they paid for it. The asset will either turn out to be a good investment or not, just like any other asset.

    Seeing as how their situation is more or less binary, this makes complete sense from the shareholders' point of view. If the FTC decision is favorable, upside is increased. If not, downside is still 0, same as if there was no buyback. The buyback basically works like cheap non-recourse leverage. As a long, I'm fine with the buyback.

  • Reply to

    Look at the ten year chart . . .

    by kravin_somhead Apr 14, 2015 12:57 PM
    walt373 walt373 Apr 14, 2015 3:27 PM Flag

    I'll give you a simple example. Say a dollar bill is being sold for 80 cents and I buy it. Then the price keeps falling until its trading for 50 cents. Sure, I could've made a better trade if I had waited, but buying a dollar for 80 cents was still correct.

  • Reply to

    Look at the ten year chart . . .

    by kravin_somhead Apr 14, 2015 12:57 PM
    walt373 walt373 Apr 14, 2015 3:24 PM Flag

    Buybacks are smart when the stock is undervalued. $60 can still turn out to have been undervalued and the buyback may yet pay off in the long run because it's possible for an undervalued stock to fall and become even more undervalued. Of course, they could've bought back stock cheaper if they had waited, but they cannot predict the future. This explanation is moot if you don't understand the concept of valuation. You can't tell anything from a price chart.

  • Reply to

    Look at the ten year chart . . .

    by kravin_somhead Apr 14, 2015 12:57 PM
    walt373 walt373 Apr 14, 2015 1:56 PM Flag

    If you think you can tell the value of the shares by looking at 10 year chart then I'm glad you're on the other side of my trades.

  • walt373 walt373 Apr 9, 2015 3:08 PM Flag

    Last year I was short a Chinese solar company called Suntech Power (STPFQ). This company was at one point the largest solar company in the world. In March, they defaulted on a massive amount of bonds but never declared bankruptcy. US bondholders tried to recover scraps from Chinese banks who were senior to them and it was clear the equity was a goose egg. Short interest was very high because it was so obvious that the stock was worthless.

    Then some idiot said Warren Buffett was interested in buying the company and the stock shot up 50% in one day. Later, FSLR had some good earnings and solar stocks, bankrupt or not, went along for the ride. STPFQ kept going from $0.40 to $1.60. The company eventually did declare bankruptcy and the stock crashed (although it's still trading for about $30 mil more than it should be.... zero). Luckily I owned long-dated puts and was able to hang on. But the point is, stocks can get massively squeezed for the most senseless, inane, and obviously untrue reasons if they have very high short interest. If you yell "fire" in a crowded place, even if EVERYONE knows there is no fire, there WILL be a stampede because everyone will fear that others believe there is a fire. That's crowd psychology for you. One can only imagine the size of the squeeze if there's a legitimate reason.

  • walt373 walt373 Apr 9, 2015 2:49 PM Flag

    8x or 9x multiple for even a zero-growth business is great for this market. Especially if its largest risk, FTC shutdown, was just removed overnight. I see a capital-light business model that until recently was highly profitable, and has a long-term tailwind with the obesity epidemic worsening all over the world (for example, look at the growth in obesity rates in China over the past two decades).

    As for secular vs cyclical, I have no reason to believe HLF is at a secular inflection point. It was growing for a long time before and its sudden slowing coincides with the business model changes. The markets that implemented the biz model changes earlier are holding up better than markets that just implemented them, which lines up well with that explanation. If you have evidence that they've reached saturation, I'd love to see it.

  • walt373 walt373 Apr 9, 2015 2:29 PM Flag

    First of all, PE won't matter if the FTC clears it. There will be a short squeeze if that happens, period. There is more short interest than float available to cover those shares. That alone should raise a red flag for any experienced shortseller. The risk/reward as a short is just insane because there's so much tail risk that you basically need to be 100% sure that the most extreme scenario will come to pass for this to be anything less than an utterly reckless gamble.

    Second, your earnings come at a time when there's a confluence of temporary negative factors like USD appreciation, currency crisis in Venezuela, and biz model changes. The USD will not go up indefinitely, Venezuela can't be written down past zero, and I doubt the biz model changes will send them into permanent decline. The best time to buy a stock is when PE is deceptively high due to earnings being at a trough.

STPFQ
0.198+0.002(+1.02%)May 1 3:52 PMEDT