It’s unreasonably large. It does not pass the “resonable man” test.
she is not for your average man…
But back to Sears…you guys buy Berkowitz argument?
what you guys think of Sears? the Sears in Canada suck, no one goes there…
The Sears in the US suck. The last time I stepped into a Sears was 5 years ago because they were the only store that had a $5 specialty screwdriver that I couldn’t find anywhere else.
funny thing is you have Ed Lampert, Berkowitz, Chou who are all great investors being in this thing…there must be something they all see that i’m missing…i understand the real estate may be understated but still…
I see nothing of value in Sears. But I’m not a deep value guy so not qualified to comment.
Anyone looked at RGS lately?
I think a couple people are betting on it getting bought out soon at around $22.
Summary (for brevity):
RGS is basically the fast food of hair salons. They have the highest market share in a highly fragmented industry which isn’t saying much. They operate on a low cost basis and are mixed between company owned and franchise. Probably their most successful hair salon chain is Supercuts. They have multiple others including the franchise that operates in Walmart. I think overall there a poor stock to buy for the LT because women view haircuts on the basis of quality, not price. Operating as a low cost sub-par quality hair salon is only appealing to men, not women. Plus, who wants to get their haircut at walmart?
Anyway they have been selling off many non-core assets throughout the year and a group of insiders have been buying it up this latest month. Options are heavy in calls so it seems like 1 person thinks its getting bought out. Finally, there were rumors of selling to Apollo back in Dec 2010 so I think that with the selling of non-core assets, insider buying, option activity that it seems like they might get bought out at around $22. I got long a couple days ago, see how it goes.
What was the gap down, did they whiff on comps? Is this the same management group that rejected a buyout a few years ago?
It should be a good business, I think the issue historically has been the clown show in the executive suite. Probably worth a look though.
Don’t get me wrong, I get the whole argument of the real estate providing a floor for the value of the stock. But that’s ignoring the trend away from big box stores and onto the internet which could limit the value of the commercial real estate. There is also so much more competition in the core appliances and electronics then there used to be when Sears was doing well.
I wish I could make money trading the stock because its a big mover, but I’ve never tried.
Same thing with Best Buy, which is a bankruptcy. Not tomorrow the day after, but these things won’t exist in another 20 years. I am less familiar with SHLD so maybe I am missing something there, but BBY is definitely a goner.
Retail is just a bad business overall – cap intensive, high fixed cost, inflexible op. leases, low margin, cyclical, etc. Yuck. It is one of my least favorite sectors of the economy to look at. Broken big box is even less desirable.
Maybe there is a real estate / liquidation case and Lampert can pull it off, I guess we’ll see. Wouldn’t be something I want in my portfolio though.
This looks really interesting. Hair salons are a good business - capital light, low overhead, employees are not highly skilled. Their dilution is worrisome though.
Yeah it should be a good business, but I glanced at it a couple of years ago and they’ve had years of negative comps. It was either wildly mismanaged or there is some issue with increasing competition. A little bit could be macro related but not for years like that – most people are not cutting their own hair at home.
Assuming the store base is intact it should be a natural buyout with steady FCF. It’s weird that the stock has been struggling since 2004 since you would think there is ample opportunity to create value here with the balance sheet.
Anyway maybe I’ll dust this off, it’s pretty compelling that they’re selling stuff and maybe getting a clue with insider buying.
Seears in Canada is going much better. Maybe it’s because we have less choice.
I just glanced at this for 10 minutes and I think it looks really interesting:
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New CEO (marketing / brand guy, which is what they need); clown show management out (both CEO and CFO, changes on Board including major shareholder with a history of activism)
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Un-deworsifying. Got bagged on acquisition in 2007, levering up the balance sheet on declining profits; dilution when they had to refinance that debt (shareholders wept)
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Gonna be messy with a $0.30-0.35 EPS hit from the divestitures a/a, Street on hold or sell (6/7 analysts) until a positive trend emerges. Comps still look horrible (how do you lose 3% a year for years in a row with a freaking hair salon?). Steve Cohen would ask former management, “Do you even know how to do this job?” (Answer: No)
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Fragmented industry that can be rolled up if RGS decides to buy at low multiples (if that makes sense)
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Core asset should be highly valuable: operating income % between '94 and '07 was between ~7 - 9.5% (vs. recent <5%). Economics of hair salons probably have not changed, this is likely a reflection of mismanagement
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Even with severe mismanagement, the company has still done avg EBITDA / yr of $261 (4.2x) back to 2001 and avg FCF of 124 (8.9x). This stock is a screamer if new management can, you know, not suck horribly at some point in the relatively near future.
Great profile: was shitty, probably getting less shitty with low expectations and a good core asset with potentially a long tail at a lowish valuation.
I would definitely spend more time on this…
bromion
what are your thoughts on HP, DELL, INTC, MSFT…
No thoughts, I never look at stocks that big.
Apparently HP is having a bad day though. I am no fan of Meg Whitman (“the destroyer of EBAY”) but HP is probably worth looking at for an hour to see if anything jumps out.
yeah bro…i understand your smaller less followed stocks strategy…
i’m glancing at it at the moment, stock looks cheap on a quantitative basis…
Value Trap. It’s cheap for a reason…
What’s the reason? I assume they have big PC exposure, incompetent management, and are working from a position of weakness after years of abuse and neglect. Is there anything else not to love about this stock?
^ This.
Frank, here is what Dr Burry says about investing in tech:
I just go for what has value. To me, ignoring tech doesn’t make sense. I’ve done well with Apple, Oracle, American Power this year. IMO, applying traditional value criteria to tech is deadly, because there is usually a reason it looks like a value, and it is too technical to understand. So in tech I look for:
- Big, Buffett-like established companies with tremendous cash-generating ability that are out of favor despite a franchise on something 2) Small techs trading at about cash with no debt. They usually do well in my experience.
In tech, good management is rare and when it is present limits become merely a figment. But for an outsider to somehow judge this before the Street does – I don’t know that it is possible.