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General Body Meeting 02-15-12

General Body Meeting 02-15-12. Welcome. News Updates. Technology Sector. Today’s Action. Open - 514.26, Close – 497.67, -2.31% Went above 500 on 2/13 on strong earnings and better than expected iPhone sales

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General Body Meeting 02-15-12

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  1. General Body Meeting 02-15-12

  2. Welcome

  3. News Updates

  4. Technology Sector

  5. Today’s Action Open - 514.26, Close – 497.67, -2.31% Went above 500 on 2/13 on strong earnings and better than expected iPhone sales High – 526.01 at noon before dropping in a market selloff (Nasdaq down -0.55% to 2915.83) At 497.58 in afterhours trading
  6. For the Future iTV and iPad 3 expected this year CEO Tim Cook - “"From the first day [the iPad] shipped, we thought that the tablet market would become larger than the PC market, I feel that stronger today than I did then.“ App innovation, enterprise sales, smaller iPad in pipeline Barclays Capital analyst - "If Apple were to sell a TV, we continue to believe its margins and pricing could be industry leading given its vertical integration with content,“ Integrated television set, ahead of competition, could contribute $5.40 to EPS
  7. Two Minute Drill Guest Lecturer: Ali Yazdi Topic: Short Squeeze

  8. Tata Motors Liquidation Pitch

    John Yoshida
  9. Tata Motors Overview India’s largest automobile company Part of Tata Group 3rd largest bus manufacturer in the world 4th largest truck manufacturer in the world 3rd largest manufacturer in passenger cars
  10. Original Thesis Points & Proposal Current short-term risks outweighing long-term potential Current price level makes investment extremely attractive Short term play for correction Geographic and risk diversification for portfolio Proposal Buy $2000 position Revisit after 20% appreciation
  11. Stock Price Analysis (6-Month)
  12. Stock Price Analysis (Comparison)
  13. Q3 Earnings (2/14/2012) Revenue: +44% yoy Net income: +41% yoy China sales Jaguar-Land Rover sales
  14. Original DCF Summary EV/EBITDA Multiple Range: 7x – 8x WACC: 9% If anything, conservative $19.16 – 21.18 Share Px as of 9/21/11: 16.26
  15. Thought Process Our thesis only was for a short term play and it was fulfilled Massively outperformed competitors in market Fundamentally don’t see such value left in TTM Take profits now
  16. Proposal Sell Liquidate entire position and take profits of ~90% in appreciation Questions?

  17. Sears Holding Short SaleTicker (SHLD)

    Ali Yazdi Zachary Peskin Andrew Freiman Eric Hoffman Abhi Shah
  18. Basics of Retail Industry Retail firms sell “finished products” to consumers Second largest industry in the US $3.8 trillion in annual sales (not including food) Employs 12% of workers in US 90% of retail stores are single stores (i.e. “mom & pop” stores) World’s biggest retailer is WalMart with $350 billion in annual revenue
  19. Online vs. Stores Online retailers compete fiercely with traditional, store-based retailers Amazon.com Overstock.com Zappos.com Online stores can generally offer generic goods cheaper than physical stores Forrester Research: By 2014: e-commerce will be approx. 9% of all retail sales
  20. Generic v. Differentiated The specific goods the store sells is important Generic goods Goods with many perfect substitutes Vacuum cleaners Mops Sold by many retailers Low margin Differentiated Goods Few perfect substitutes iPad Organic supermarket Consumer seek out these stores High margin
  21. Retail Sales
  22. Retail Sales ETF: XRT Top Holdings WalMart Amazon CVS Costco Dividend Yield = 0.99% P/E ratio = 15.10 Price/Book = 2.02
  23. Retail Sales ETF: XRT

  24. Sears Holdings Overview

  25. Sears Holdings Corporation: Overview 4th largest broadline retailer, headquartered in Hoffman Estates, IL. Operates through subsidiaries Sears, Roebuck and Co. and Kmart Corporation Sells literally everything Home appliances, tools, lawn and garden, consumer electronics, automotive repair and maintenance, health and beauty supplies, etc. Operates approx. 4000 stores in US and Canada
  26. Overview Cont. Merger of Kmart and Sears as Sears Holdings Corporation closed on March 24, 2005 Continue marketing products under previous labels Launched mygofer.com in 2009 Online grocery service allowing customers to get items from stores where and when they want them Owns SHC Realty One of largest corporate real estate organizations worldwide Buy or lease Sears and Kmart stores
  27. Products and Services 2011 Energy Star® energy retail partner of the year Key proprietary brands Kenmore, Craftsman, Diehard and Country Living collection Key apparel offerings Lands' End, Jaclyn Smith and Joe Boxer, as well as the Apostrophe and Covington brands Nation's largest provider of home services More than 11 million service calls made annually
  28. Products

  29. Competitive Landscape

  30. Major Competitors J.C. Penney Target Corporation Wal-Mart Lowe’s Ace Hardware Best Buy Kohl’s Home Depot Bed Bath & Beyond Amazon.com
  31. Profitability 2011 Net Profit Margin
  32. Valuation Ratios
  33. Financial & Operational Ratios
  34. Share Data & Growth High revenue per share offset by consistent revenue decline Extremely low CF per share and tremendous decline in Net Income and EPS

  35. Financials

  36. Follow the Trend
  37. Follow the Trend
  38. Follow the Trend
  39. Sears Valuation Traditional ways of valuing a company Discounted Cash Flow Sears has negative cash flows though… Multiple Comparisons Sears has negative multiples though… Bankruptcy Valuation Essentially look at all of Sears’ total assets and divide that by the number of shares
  40. Sears Valuation Book Value per Share $71.92 When extrapolating this trend: Sears will depreciate to zero in Total Equity in 9.6 years
  41. Follow the Trend Depreciating assets, as Sears’ fleet of stores depreciates in value from age and disrepair Commercial Real Estate Crisis continues to decrease storefront value Online shopping continues to grow at expense of big box stores Industry emphasis towards smaller stores means that no one will even buy Sears’ old storefronts
  42. Analyst Price Estimates

  43. Technicals

  44. Relative Strength Index (RSI)
  45. Bollinger Bands
  46. Volume

  47. Short Squeeze

  48. Share Performance Valid question to be asking: “If Sears is performing so badly, then why has the stock gained 60% in the past few months?” Short Squeeze
  49. Short Squeeze Overview
  50. Short Squeeze Overview
  51. Proposal Short 50 shares of SHLD at: Market Price (approximately 52.5) Grand Total of ~$2600 Short term time frame (2-4 months) Watch reaction after earnings next Thursday

  52. Announcements

  53. Stock Competition Investopedia Trading Simulator $100,000 in Virtual Money Full Trading Platform (Short Selling, Options) Weekly Leaderboard Update Game Name: MICC Stock Competition Password: Cornell
  54. Stock Competition
  55. Brainteaser What’s the difference between the hour and minute hand when the clock strikes 4:20?
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