***Official*** 2013 Stock Market Thread

[Imp]

Okay, I'm all in. On the bright side, most of my shit is in 5% and up dividend paying stocks. On the shitty side, everything non-American is tanking and I have more non-American stuff than American.

 

[dr150]

Okay, I'm all in. On the bright side, most of my shit is in 5% and up dividend paying stocks. On the shitty side, everything non-American is tanking and I have more non-American stuff than American.

Mexico and Thailand for short/mid term plays and then revisit it.

The rest of the world is tanking and should be kept in US and purchased on dips. I'd wait for AAPL to tank next week before buying on these dips.

 

[JTsyo]

Another down day. Might move some money in if things keep going down tomorrow.

 

[zimu]

Another down day. Might move some money in if things keep going down tomorrow.

was thinking the same thign - except putting some in now - expecting a jump in the morning. Not sure what to put it into though... FB is probably a good long term bet.

 

[JTsyo]

was thinking the same thign - except putting some in now - expecting a jump in the morning. Not sure what to put it into though... FB is probably a good long term bet.

I was thinking just SPY.

 

[Imp]

That MSFT sure is dying... And Windows 8 is a complete flop too. Right?

http://money.cnn.com/2013/04/18/technology/enterprise/microsoft-earnings/index.html?iid=HP_LN

 

[dr150]

was thinking the same thign - except putting some in now - expecting a jump in the morning. Not sure what to put it into though... FB is probably a good long term bet.

LINKEDIN>>>>>FB.........Compare performance. A darling among analysts.

If you want to add to your core holding, VOO>>>SPY, IVV, SCHB (lower expense ratio and tracks the index a little better).

If you like a fatter dividend yield, VYM.

 

[IHateMyJob2004]

Bought FBN for $1 on Friday. Time and time again, I buy this at 41 or less and sell it for north of $1.20.

As the housing market recovers, so should this company.

 

[zimu]

Bought FBN for $1 on Friday. Time and time again, I buy this at 41 or less and sell it for north of $1.20.

As the housing market recovers, so should this company.

Looks like its worth a shot. Think I'll put that in my high risk 'gamble' quota though!

 

[richardycc]

FBN looks like my kinda stock too..with all those well known brands, Warren Buffett might even be interested for his furniture stores.

 

[Nerva]

Anyone look at shorting Angie's List (ANGI)? I have done a lot of work on it and would be willing to share my model.

 

[IHateMyJob2004]

FBN looks like my kinda stock too..with all those well known brands, Warren Buffett might even be interested for his furniture stores.

The problem with furniture companies as they become more and more commoditized as each year passes. Those known brands will probably matter less in 10 years. FBN doesn't have the best management either.

Thing is, if housing recovers, FBN could turn FCF positive again. If it does that, the stock could jump greatly.

Thing is, they do make furniture for companies like Ikea too.

I doubt Buffett would want this one. He is more of a La-z-boy type person. La-z-boy is probably the best brand name out there in furniture.

 

[IHateMyJob2004]

Anyone look at shorting Angie's List (ANGI)? I have done a lot of work on it and would be willing to share my model.

Has no moat. Sure, what is the short thesis?

Wow, up to $20. And trades options. Hrmmm ....

 

[Nerva]

Has no moat. Sure, what is the short thesis?

Wow, up to $20. And trades options. Hrmmm ....

Angie’s List – Target price $10
Short Angie’s List on unsustainable business model, quickly declining of membership revenue, and high valuation. The only way for AL to become profitable is to cut back on marketing and selling, which should be followed with a precipitous drop in revenue.
Tough competition
Competitors for Angie’s List include NextDoor.com, Home Advisors, Yelp and other more localized online communities such as CitySearch.
• Home Advisors is the closest competitor that offers Angie’s List like services free of fees
• NextDoor recently received $21mm in funding from venture capital firms. NextDoor also requires real name and address registration, with the end goal of creating local social communities within a neighborhood. NextDoor recently increased its presence from 3,000 neighborhoods in July 2012 to 10,000 today. Estimates put active user (once per week) at 750k, which already puts it ahead of Angie’s List given the speed of growth.
• Yelp is increasingly foraying into markets that Angie’s List focus on (home improvement and healthcare). 11% of Yelp’s reviewed businesses is Home & Local Services: third largest behind shopping and restaurants
o Yelp currently derives revenue from approximately 40k service providers. In addition, Yelp has almost 1mm claimed local business locations and 47mm service providers on its platform
o Angie’s List does not have such a readily accessible database to draw from to grow its advertiser base

Bottom line: there is a lot of competition in this business and a paid subscription model is not sustainable.

AL is currently trading at 7x 2012 revenue of 155mm and 4.5x 2013 consensus revenue of 240mm. My target price of $10 is based on 2015 EBITDA assumption of $70mm and a 10x EBITDA multiple. I believe AL can achieve $8mm of EBITDA in Q4 2013. The $70mm 2015 EBITDA estimate is essentially $8mm annualized and then doubled. The 10x multiple was chosen because that is Google’s 2013 valuation.
Angie’s List business model
• Enters a market, solicit reviews of local mom and pop service providers from local residents by offering them free membership, takes the reviews, pitches said local mom and pop service providers to collect advertising revenue
o AL also reaches out to local businesses and ask them to either provide a list of its past customers that AL can reach out to solicit reviews for, OR gets the local business to pass out comment sheets to its past customers (these comment sheets are mailed to AL for processing)
o I have seen anecdotal evidence where AL steals reviews from other sites upon entering a new market

• Three revenue streams
o Membership fees – approximately $30/membership/year. Suppose to have mid-70% renewal rate, but this figure is not trustworthy. This is ~30% of revenue, but declining fast
 A potential explanation for such high renewal rate is that customers do not necessarily renew. They are automatically renewed at the membership rate in that market (subject to class action lawsuit)
o Ad revenue from service providers – charges service providers to show up on Angie’s search results, advertise in AL publications. ~60% of total revenue
o Groupon-esque deals – offers promotions and deals from service providers, collects a % on contract value
Membership revenue
• This is declining 15-20% a year because of
o Unbundling of subscriptions in mature markets
 In less mature markets, members subscribe to bundled memberships (home care + health care)
 Selective checks show that unbundled ARPU ($43/year) is ~ 50% of bundled ARPU in its most developed market
o Entering new markets where memberships are given away for free for two years
o IR concedes that this will continue to be under pressure
 Angie’s List offers significant discount to first time subscribers. 40% off coupons are perpetually available (40% off first year subscriptions with an additional 20% off if using Paypal, 10% off renewal subscriptions)
 Current new subscriber price for the 10 oldest markets is 33.8/year unbundled and 44.7/year bundled, vs 43/year in 2012 (pre promotion)
 For the 2nd oldest 10 markets, ASP is 30.2/year unbundled and 40.7/year bundled, vs. 37/year in 2012 (pre promotion)
o Anecdotal evidence also seem to support the notion that the best way to obtain a contractor is through thorough due diligence by a customer and word of mouth
o Marketing expense is essentially the COGS for this revenue stream. “Gross profit” for membership revenue for 2010, 2011, and 2012 are -5.1mm, -22.3mm, and -32.5mm, respectively
Service provider revenue
• Contracts last 12 months but renewal rate isn’t reported
o Yelp reports 70% renewal rate for advertisers
o Suspicious that renewal rate is low because of the amount of sales people focused on origination vs. renewal (558 vs. 139)
o Number of service provider per subscribing member have been declining by 10% a year for two years. Perhaps service provider acquisition is slowing down
o Anecdotal evidence supports the fact that renewal rate is low for service providers (whether it’s service providers who were duped into a full year contract by sales personnel, or that AL simply hadn’t generated enough leads to make it economic)

Class action law suit
Angie’s is being sued by one of its longtime members. Marie Fritzinger, a member since 2007, filed a lawsuit in U.S. District Court for the Southern District of Indiana. The suit alleges that Angie’s List automatically renews membership fees at a higher rate than customers are led to believe. This practice has been on-going since August 13, 2006 and became worse after 2010. That’s when Angie’s list implemented a change in membership in its 30 most mature markets.

Angie’s List will most likely require an equity raise in 2013 as it continues to burn cash. Management indicated that they would not let liquidity get below 60mm (currently at 68.1mm made up of 53.1mm in cash and 15mm of credit facility), though I believe Q1 and Q2 of 2013 will burn approximately 21.5mm. Current management guidance for Q1 2013 indicates a cut back in expenses (marketing), which I believe is the management’s way to make the financials look better. I believe a sustained cut in marketing expenses will result in a plunge in membership numbers.
Risks
• AL trades on revenue. They can potentially hit the revenue guidance of 50-52mm in Q1 2013 if membership growth picks up
• Short squeeze – 18% short interest

Other comments
Angie’s List is actually being dishonest when it says service providers can’t pay to be on the site. The truth is that service providers can pay to show up in page 1 of search results. AL touts that the members are not anonymous when that’s exactly what they are. In fact, if a business wants to have a positive review, which the minimal requirement to show up on search results on the AL website, he can easily pay $30 to become a member and write a positive review.

 

[Mermaidman]

WTH happened at 1:15 PM today? A sudden and short-lived downward blip!

 

[Jeffg010]

WTH happened at 1:15 PM today? A sudden and short-lived downward blip!

LOL if this is what caused it. Fake tweet that the white house blow up and the prez was injured.
http://www.cnbc.com/id/100664423?__source=yahoo|headline|quote|text|&par=yahoo

 

[Mermaidman]

LOL if this is what caused it. Fake tweet that the white house blow up and the prez was injured.
http://www.cnbc.com/id/100664423?__source=yahoo|headline|quote|text|&par=yahoo

Daammnnn - That's a nice way to manipulate the market. Cause a scare, buy lots of shares . . . Profit!

 

[JTsyo]

Daammnnn - That's a nice way to manipulate the market. Cause a scare, buy lots of shares . . . Profit!

I wonder how many stops that triggered. Need to learn to game the HF trade algorithms for personal profit.

 

[Imp]

I am completely overdoing preferreds: cashed out my MSFT for a ~12% cap. gain plus 1 dividend payment, put it into 6%-ish PFF and PSK. If only I weren't tanking on the Canadian side.

 

[dr150]

Daammnnn - That's a nice way to manipulate the market. Cause a scare, buy lots of shares . . . Profit!

Traders said that they made all the way down, but lost 70% of that profit on the ride back up. :biggrin:

 

[IHateMyJob2004]

Nerva,

Good write up.

Trading at that kind of revenue mutiple. Wow. Your comments all make sense.

Very good write up! It's late. I'll have to re-read with a fresh mind tomorrow!

 

[Nerva]

Nerva,

Good write up.

Trading at that kind of revenue mutiple. Wow. Your comments all make sense.

Very good write up! It's late. I'll have to re-read with a fresh mind tomorrow!

You gotta be careful with this name though. The street fucking loves this name. They have been pumping this thing all week on higher subscriber numbers. Earnings today after close, they can beat because they guided pretty tame. Also do your own work too.

 

[richardycc]

I actually paid $13 last month for a yr of Angie's List subscription for a bathroom remodeling. would I renew the subscription? most likely not. The membership is always on sale, noone really pays the full price. They do have a big deal page, which is just like Groupon selling goods and services from your local businesses at a discount.

 

[Imp]

Aw damnit, MSFT went up over 3% today and AT&T went down 5%. I sold the first, held the latter. Oh well.

 

[Nerva]

I actually paid $13 last month for a yr of Angie's List subscription for a bathroom remodeling. would I renew the subscription? most likely not. The membership is always on sale, noone really pays the full price. They do have a big deal page, which is just like Groupon selling goods and services from your local businesses at a discount.

Revenue beat, guided up for Q2. Things look better but can't help but think they are cutting expenses to get ready for an equity raise