Per Johansson Short Koenig and Bauer, Long LivaNova: Sohn London Conference

We're posting up notes from the Sohn London investment conference.  Next up is Per Johansson of Bodenholm Capital who presented a short of Koenig and Bauer (GER:SKBX) and a long of LivaNova (NAS:LIVN).


Per Johansson's Sohn London Conference Presentation

Short: Koenig and Bauer (GER: SKBX)

Koenig and Bauer is a German based printing press manufacturer. It has less conservative accounting. Cashflow and earnings expectations are set for a big reset.

Demand for the presses has structural challenges. Bank notes in circulation are not shrinking yet but may do in the future. Bank note printing makes up 20% of revenue, 40% of profits. They used to have a monopoly in the bank note printing area but now buyers are tendering contracts. Japanese competitors have started to win contracts recently. The other part of the business, sheetfed offset printing, is also facing headwinds. Volume is slowing and margins are contracting.

They have taken a lot of ones offs and restructuring charges making the accounts look better than they are. This may have been incentivised by management bonus targets.


Long: LivaNova (NAS: LIVN)

LivaNova is a medical device company. Bodenholm like spinoffs and they like companies that are de-conglomerizing. They have been invested in the company for 4 years and its one of their largest positions.The neuromodulation business is high quality. It’s almost a monopoly, there are high barriers to entry. They can grow revenue at 5-8% per year.

The other part of the business is better than analysts think and has market leading positions in most businesses. It can grow revenue at 5-6% and profit at 10% per annum.

They are also running clinical trials to see if the neuromodulation technology can be used to treat depression. If it can, it will be a game changer for the company because the market is huge.

LivaNova is a prime acquisition target.


Be sure to check out the rest of the presentations from Sohn London conference 2019.

Måns Larsson Short ICA Gruppen: Sohn London Conference

We're posting up notes from the Sohn London investment conference.  Next up is Måns Larsson of Makuria who presented a short of ICA Gruppen (STO: ICA).


Måns Larsson's Sohn London Conference Presentation

Short: ICA Gruppen (STO: ICA)

ICA is a Swedish based supermarket/ grocery business. It’s the largest Swedish supermarket. ICA isrun on a franchisee model.

ICA is significantly overvalued at 25x accounting earnings. It has made good returns for shareholders over the last decade, but Larsson thinks that is about to change. Given the headwinds, 14x earnings would be a fairer valuation.

Challenging fundamentals: sales volumes are declining, the store footprint is contracting, the competition in Sweden is heating up especially with Lidl quietly gaining share.The Swedish grocery market is moving online quite quickly (expect 15% of total by 2022). Online is growing at about 30% per year. ICA doesn’t make money from online sales. ICA’s offline grocery sales are declining at about 1% per annum. Lidl is growing at about 10% CAGR over the last 5 years.  ICA has stores in the Baltic region, but Aldi and Lidl will be opening stores there next year.

Larsson’s research that looks at the accounts of individual franchisees suggests that profitability is heavily skewed towards the large out of town stores (maxis). In the large cities like Stockholm and Gothenburg where online adoption is higher profitability is lower or non-existent. Because many of the franchisees are not making money, ICA as the franchisor may have to lower fees.

Quality of earnings and cash conversion is poorer than it looks: EBIT looks okay, but they have taken a lot one offs. ICA’s cash conversion is poor. Cash flow to equity holders is less than 20% - it doesn’t cover the dividend. Since 2016 about 30% of cash generation has come from non-operating items like networking capital. Reverse factoring is a big component. Management’s capital allocation has not always been good. They have invested too much in online.

ICA is a low-quality supermarket that is going ex-growth yet it is one of the most highly valued food retailers in the developed market.


Be sure to check out the rest of the presentations from Sohn London conference 2019.

Arnaud Langlois Short Air Products & Chemicals: Sohn London Conference

We're posting up notes from the Sohn London investment conference.  Next up is Arnaud Langlois of 1798 TerreNeuve Fund, Lombard Odier who presented a short of Air Products and Chemicals (NAS:APD).


Arnaud Langlois's Sohn London Conference Presentation

Short: Air Products and Chemicals (NAS: APD)

The stock is up 59% this year. APD is trying to grow at 10% per annum. To achieve this, in 2018 the company set out a plan to invest $17bn between 2018-2022 mostly into coal gasification – making gas from coal. There are risks with this process:

- Country risk, projects take place in countries that are trying to exploit coal assets like China, Indonesian and Indian

- Concentration risk, APD is investing too much into coal gasification

- Joint venture risks, their partners are in the mining industry which can be unstable

- Environmental risks. Coal gasification is a water intensive process. Plants have been stopped in China due to water shortages. It is also CO2 intensive emitting x2 coal fired power stations

Langlois’s research suggests that APD’s CO2 footprint could be 100m tons by 2025. That would give it one of the largest footprints in the S&P 500. Any new legislation that limits or taxes greenhouse gas emissions would hurt the company. Carbon pricing is established in Europe and seems likely to spread. No investor with a long-time horizon should support the APD’s business model.


Be sure to check out the rest of the presentations from Sohn London conference 2019.

David Einhorn Long Aercap, Short GATX: Sohn New York Conference

We're posting up notes from the Sohn New York Investment Conference.  Next up is David Einhorn of Greenlight Capital who presented long Aercap (AER), short GATX (GATX).


David Einhorn's Sohn New York Presentation

•    Companies that lease airplanes have better businesses than companies that lease railcars (long Aercap, short GATX)

o    Airline leases are usually at least 10 years with a 25 year life
o    Railcar leases are 5 years when it’s new or less when it is used. Useful life is around 45 years
o    Airlines in cyclical growth
o    Railroads are more cyclical
o    Airplane utilization much higher than railcar
o    Can move airplanes around easier
o    Credit has cost airline leasing companies 0.1%. Cost railcar leasing companies nothing
o    Railroads becoming more efficient and using less railcars
o    Aercap- airline leasing in growing industry. Average age 6 years. Sells 15 year old planes. Longer leases
o    GATX-Railcar leasing. 14% market share. Cyclical and secular headwinds. Provides maintenance to customers. Average 20 year age. More dependent on releasing rates. Recent leases are shorter term
o    Aercap trades at a 50% discount to GATX even though it’s a better business both on P/E and P/B
o    Aercap is buying back stock. Reduced shares outstanding by 36%. Will continue to buyback stock


Be sure to check out the rest of the Sohn New York conference presentations.

Ryan Heslop Short Community Health Systems: Sohn New York Conference

We're posting up notes from the Sohn New York Investment Conference.  Next up is Ryan Heslop of Firefly Value Partners who presented a short of Community Health Systems (CYH).


Ryan Heslop's Sohn New York Presentation

•    Short Community Health Systems (CYH): levered rollup of rural hospitals

o    Company will file for bankruptcy and equity will be worthless
o    CYH grew from 8,000 to 30,000 beds through acquisitions since 2000’s. Paid 600k per bed
o    Net debt grew to $16 billion from less than $2 billion since 2005
o    Management compensated on revenue and EBITDA. Ignores debt
o    Admissions have been declining. Patients are choosing to go to urban hospitals. Trend towards outpatients
o    Rising unit costs
o    Declining profitability per bed
o    Slashed capex by 50% per bed over 10 years. Under-investing in new technologies which fuels patient declines
o    CYH charging more and gauging out of network patients and uninsured. Top in the industry in gauging. Desperate for cash
o    Over 4 years has sold 1/3 of hospitals. Paid top dollar buying them at 600k. On sale has received 250k per bed and might be getting worse
o    Debt per bed has increased to over 700k per bed
o    Company doesn’t generate any cash. Including items the company categorizes as one-time costs they are burning a few hundred million a year.


Be sure to check out the rest of the Sohn New York conference presentations.

Sohn New York Idea Contest Winner: Short Lamb Weston

We're posting up notes from the Sohn New York Investment Conference.  Next up is the Sohn idea contest winner who presented a short of Lamb Weston (LW).

Sohn Idea Contest Winner: Short Lamb Weston

•    Lamb Weston(LW) – (Short idea) Lamb will miss estimates by 30% to 40% in next few years as margins are at peak.

o    Buys potatoes and sells them as french fries to restaurants.
o    Lots of new supply coming online. Was an unexpected boom in demand which sent margins in the business way up but a supply response is coming
o    People don’t realize that their current pricing power is cyclical and not secular. Stock is priced like a consumer staple
o    Would cost $5 billion to recreate Lamb’s assets. Company's EV is well more than double that


Be sure to check out the rest of the Sohn New York conference presentations.

Vikram Kumar Short Kier Group: Sohn London Conference

We're posting up notes from the recent Sohn London investment conference.  Next up is Vikram Kumar of Kuvari Partners who presented a short of Kier Group.


Vikram Kumar's Presentation at Sohn London Conference

(Note: On the day after the conference Kier Group made an emergency rights issue of £264m and the shares fell 34%.)

Kuvari have held a short position in Kier Group since August 2017. They are currently short 0.71% of the company’s stock. They previously held a disclosed and successful short position in Carillion, the support services company that collapsed in Jan 2018.

Kier Group are in the construction and contracting business, mostly in the UK. The UK government is a big customer – infrastructure services, road maintenance and development and civil work such as schools and hospitals.  They also build residential houses and commercial buildings.

Kuvari do not like these types of businesses because they are low margin, commoditised and competitive. If government contracts cost more than anticipated to fulfill the company is liable.

Kumar called the accounting aggressive. The contract nature of the business means that income does not come in steadily but in lumps.  The contracts can be multi-month and multi-year. There is a temptation to try to smooth revenue by booking work that may have been done but not paid for. With the IFRS 15 regulation coming in Kumar believes the company will be forced to re-state some of its revenue.

With short positions, Kuvari pay great attention to working capital and particularly receivables – how quickly once you’ve invoiced your customer can you collect cash? Kumar believes that Kier’s customers are slow to acknowledge the work that has been done and slower to pay up. He believes that Kier have been booking income before customers have acknowledged work has been done.

There is a lack of cash generation in the business. According to their accounts, Kier generated £95m in cash over the last five years. Kumar believes that they have overstated that cash. Kier had to restate their full year 2017 FCF from over £100m to -£56m after pressure from regulators.

The most worrying aspect of Kier’s business is the high leverage. Kuvari estimate debt could be as high as 6.8 times, taking them well into distressed territory. Kier owns the equivalent of 68% of the equity in JVs. Kumar believes that the JV’s are being used to hide the leverage. The debt is not being consolidated. Kier also calculates leverage at a low point during the financial year and does not average it which would lead to a higher figure.

Be sure to check out the rest of the presentations from the Sohn London investment conference.

Francis Cueto Short Belden: Capitalize For Kids Conference 2018

We're posting up notes from the Capitalize For Kids 2018 investment conference.  Next up is Francis Cueto of Asturios Capital who pitched short Belden (BDC), seeing 40-50% downside.


Francis Cueto's Capitalize For Kids Presentation: Short Belden

Secular Decliner

•    What is it?
o    Hard to tell, reporting on segments changed 3 times last 3 years. Trying to hide core of biz. Change revenue segments
•    Asturios has their own revenue segment mix that they have estimated. 62% of revenue in Copper Cabling and Connectors. These are the guys who make the “cords” in cord cutting.
•    Copper competitive mix vs. fibre, 5G / Wi-Fi, awful, on other side of all trends
•    ATT CEO on Apr-17 - 5G quote on replacing copper connectivity
•    CEO VZ Dec-17 - Copper cos will see a secular decline, just can’t deliver the functionality
•    CFO Commscope Aug-17 - Copper side of market is a non-growth biz
•    Cost of copper vs fibre - Fibre costs down 19% over 15 years - Copper cost has 114% over that time period.


Deceptive Accounting

•    “Adjusted” NI vs FCF – serious discrepancies
•    FCF down significantly, but adjusted NI curiously stable.
•    Working capital and restructuring killing the FCF
•    Rising inventory days and DSO. Inventory on shelves and financing sales
•    Big jump in 1 time restructuring costs
•    Snell Acquisition - Q1 2018 acquisition in the UK. No press release.
o    Only mention buried on the 82nd of 10-K. Helped them beat the quarter.
o    Who is Snell? Shrinking revs
o    Down from 105mm -> 80mm over last 5 years. No 2017 revs. They guide it up to $115mm of revenue post acquisition in 2018.


Bad Balance Sheet

•    Drives suboptimal strategic behaviour - underinvestment
•    Constrains shareholder friend corporate action - transformative M&A / buybacks
•    Amplifies impact of downward revisions
•    2.7x net leverage (Management’s definition) to EBITDA
•    3.8x Net leverage w/ preferred convertible (management)
•    4.5x net leverage w/ preferred ex restructuring
•    5.8x net leverage w/ preferred ex restructuring and NWC
•    If not worth more than 6x EBITDA, equity worthless

Target price is $34, 46% below current trading levels.


Be sure to check out the rest of the presentations from Capitalize For Kids 2018. 

Kase Learning Short Selling Conference Presentations 2018

Whitney Tilson recently launched a new investment conference focused on short selling called the Kase Learning Short Selling Conference.  They've released some videos of pitches from the presentations and we've aggregated them here along with notes from each talk if you just want a quick summary.

Click each link below to go to the presentation.


Kase Learning Short Selling Conference Presentations 2018

- Sahm Adrangi (Kerrisdale Capital): On ad fraud and Quinstreet (QNST)

- Mark Spiegel (Stanphyl Capital): Short Tesla (TSLA)

- Gabriel Grego (Quintessential Capital): Short Folli Follie

- Jillian McIntyre (221B Capital): Short Intelsat (I)

- Berna Barshay (Viola Capital): Short Ralph Lauren (RL)

- Enrique Abeyta: Short Anheuser Busch InBev (BUD)

- Chris Brown (Aristides Capital): Short Energous (WATT)

- Asher Jacobs & Jade Hu (Columbia MBAs): Short Stericycle (SRCL)

Mark Spiegel Short Tesla Presentation: Kase Learning Conference

We're posting up a series of presentations from the recent Kase Learning Short Selling Conference.  Next up is Mark Spiegel who pitched short Tesla (TSLA).  He thinks the company is a zero.


Mark Spiegel's Presentation: Short Tesla (TSLA)

- Telsa's financials are horrible and has no moat of any kind, and this is all before a ton of competition comes online

- Management can't be trusted after Elon Musk made misleading statements

- Lost over $25,000 per car sold based on recent earnings.  Sales of two top models were down double digits year-over-year, again this is before top competition comes online from Porsche, Jaguar and others

- $2.3 billion in negative net working capital, And - $1bn in negative net working capital.  Bulls point to the story being about 'the future' but Tesla's tax credits will expire later this year while competitors will just be starting to use their credits.

- Competition coming:  Jaguar I-Pace coming out is $10,000 less and much nicer.  Jaguar XJ Sedan also going electric.  Audi electric SUV coming 2018 winter and priced $5000 cheaper once Tesla's tax credit runs out.  Porsche's Mission E sedan coming.  Mercedes' ECQ coming out and electric version of the S Class.  Hyundai coming out with a crossover for the mass market.  Chevrolet Bolt out now.  Nissan Leaf next year increases electric range.  First electric Volvo comes out next year.  BMW iX3 comes out in 2 years, and i4 flagship electric car.  The list goes on and on.

-  China is a big market and very important; bulls think TSLA will gain share there but the reality is that so much competition is coming especially in that country that they've already lost

-  Other car companies using larger battery cells and Tesla is committed to smaller, inferior ones

-  Stunning number of executive departures.  Jim Chanos said the only two companies that had similar numbers are Enron and Valeant

Embedded below is the video of Mark Spiegel's presentation:




Be sure to check out the rest of the presentations from the Kase Learning Short Selling Conference.

Sahm Adrangi's Presentation on Ad Fraud & Short QuinStreet: Kase Learning Short Selling Conference

We're posting up a series of presentations from the recent Kase Learning Short Selling Conference.  Next up is Sahm Adrangi of Kerrisdale Capital who presented about ad fraud and talked about Quinstreet (QNST) which he published a short report on last month.


Sahm Adrangi's Presentation on Ad Fraud & Short QuinStreet (QNST)

- Recently gave a presentation on being short St. Joe (JOE) and short QuinStreet (presentation here), the latter of which plays into the theme of ad fraud

- Ad fraud is basically when online ad impressions or clicks are artificially higher due to bots, not actual users viewing the material.  Pay-per-click ads see 'fake' clicks and then there's sites with tons of fake traffic that are just full of ads to inflate the numbers.  Ad stuffing is when a video has other videos behind the main video someone is watching, giving impressions to something that's not actually being viewed

- Ad fraud is so prevalent and the intermediaries are beneficiaries of it (ad agencies etc), making them slow to adopt preventive measures.  The ultimate loser is the buyer of the ad but it's difficult to detect who is viewing your ad (human vs bot)

-  Technology is rapidly evolving and the bad actors are using more sophisticated measures to generate more fraud

- QuinStreet: if you look at investor presentations or management comments, it's hard to discern where exactly the revenue is coming from (lead generation, or ad-matching placements, etc).   Another report by a separate firm attacked Criteo late last year for suspect traffic as well.

- Walked through examples where some of Quinstreet's sites were receiving traffic from other sites that isn't what it seems: a car insurance site was receiving a lot of traffic, but not from people looking for quotes on car insurance, but rather people earning 'swag bucks' for filling out online surveys and things like that.  Thus car insurers buying ads / paying for leads, weren't really getting what they thought they were (the video below walks through the whole scenario as it's too long to type out)

- Thinks the opacity in the online ad space and lack of disclosures is a good place for short activists to hunt

Embedded below is the video of Sahm Adrangi's presentation:



mbedded below is the slideshow pdf of Sahm Adrangi & Kerrisale Capital's presentation on short QuinStreet (QNST):



Be sure to check out the rest of the presentations from the Kase Learning Short Selling Conference.

Jillian McIntyre's Short Intelsat Presentation: Kase Learning Conference

We're posting up a series of presentations from the recent Kase Learning Short Selling Conference.  Next up is Jillian McIntyre of 221B Capital who pitched a short of Intelsat (I).  She runs a fundamental long/short equity fund, typically running 20% net short, typically focuses companies with poor corporate governance (Germany, UK, South Africa, Australia).  Previously worked with Sir Chris Hohn's TCI Fund.


Jillian McIntyre's Presentation: Short Intelsat

- 50% downside in her opinion, only 7% short interest.  $14bn of debt, $1bn run-rate of interest every year, negative cashflow

- Believes company is ripe for technology disruption and has a bad business model; needs capital ASAP

- Company is in satellite communications, provides signal broadcast to major networks, media companies etc.  Mainly exposure to Latin America and Africa.  Thinks there's some similarities to SunEdison (which they pitched back in 2015 which went bankrupt): levels of indebtedness & bad business model

- The recent hype surrounding 5G and the big spectrum auction in November has led to irrational exuberance as Intelsat is up almost 300% this year.  Lot of hype around the potential for C band spectrum.  Even if it's allowed by FCC, could take over a year to start to monetize it.  She thinks the company will see disruption in its ancient satellite model.  Lower-orbit satellites will be launched and are better and cheaper than Intelsat's much higher satellites.  Lots of hype also around potential with 'OneWeb'

-  Co has very complex debt structure and is a serial re-structurer: they think it breached covenants and will need to raise $400-500 million and worst case $1.5-2 bn. Don't think they have access to new revolving credit facilities.  Thinks they have aggressive accounting regarding bad debt provision and amortization rates and reliance on future revenue


Embedded below is the video of Jillian McIntyre's presentation:





Be sure to check out the rest of the presentations from the Kase Learning Short Selling Conference.

Berna Barshay Short Ralph Lauren Presentation: Kase Learning Conference

We're posting up a series of presentations from the recent Kase Learning Short Selling Conference.  Next up is Berna Barshay of Viola Capital Management who pitched a short of Ralph Lauren (RL). 


Berna Barshay's Presentation: Short Ralph Lauren (RL)

-  Consumer specialist.  Industry ripe with disruption.

-  80% of household purchase decisions made by women, 80% of investment choices made by men

-  Ralph Lauren in the middle of attempted turnaround:  Co has lost 19% of sales last three years.  Why?  Historically positioned as an upscale brand, they over distributed (discounting, margin pressure).  Longtime COO departure led to disruption.  Trying to now pullback on promotions and try to reach a new, younger customer.  Stock up 70% in last 9 months, she's more skeptical on turnaround attempt and speed at which it would happen.

-  In the age of Instagram, brands can't control their story as much.  RL is too focused on North America.  Department stores in secular decline.  Trying to replicate Coach merely by reducing points of distribution

-  Ratio of outlets to full price stores is out of whack and is a challenge to elevating the brand back up.  Co is also omnipresent in the 'off price' channel.  TJMaxx and Marshall has a lot of inventory and continued to grow.  The difference between the $89 polo shirt at their flagship store wasn't that much different from the $35 polo shirt at TJMaxx.  RL has devalued their signature item and devalued their brand in the process.  This will be a headwind in the brand elevation efforts.

-  Co wants to update the product and modernize the brand: does this alienate the core customer they have?  Tough to straddle.  It's a preppy, country club look that's been around since the 70s.  Millennials and younger have much different street style

-  She talked to 200 Millennials about favorite clothing brands and received a wide array of responses: RL hardly on the radar, lots of newer brands, niche brands, etc.  Barriers to entry in clothing have come way down.  RL did much better with men than women in survey.

-  Near-term return to topline growth is nearly impossible due to off-price channel and department stores in secular decline.  Trading at 18x like a luxury goods stock but needs to show tangible results

-  Brand turnaround takes years and thinks that while expectations are low, still thinks estimates are too high.  Upcoming investor day could be a catalyst.  Thinks earnings will be flattish for next 2 years.  N. America growth will be down 4%, 11% earnings miss.  Thinks it should trade around 13x, for 30% downside though it's not a valuation short 

Embedded below is the video of Berna Barshay's presentation:




Be sure to check out the rest of the presentations from the Kase Learning Short Selling Conference.

Gabriel Grego's Short Folli Follie Presentation: Kase Learning Conference

We're posting up a series of presentations from the recent Kase Learning Short Selling Conference.  Next up is Gabriel Grego of Quintessential Capital who pitched a short of Folli Follie.  (Please note that since presenting earlier this month, the stock traded down 70% and was subsequently halted.)


Gabriel Grego's Presentation: Short Folli Follie

-  Co has 1.3bn euros of sales, trades on the Greek exchange, products are watches, purses, mainly jewelry etc.  70% of revenue and all profit originates in Asia, mainly China.  Now investing into the United States

- Actual sales and profitability are less than accounting suggests. Business is shrinking rapidly, they are worried about potential insolvency

-  Called 630 stores, they only found 289 open... nobody answered or store was closed.  Out of 248 supposed stores in Asia, they only found 64.  Hired Chinese and Japanese teams to do due diligence in the countries.  Went to visit stores, found many were tiny, non-existent or liquidating

-  Claims solid online sales, but traffic is tiny compared to big competitors who supposedly generate similar revenues.  Social media has a tiny presence as well compared to others

-  Thinks the company will have to issue shares or bonds to makeup for a shortfall soon

-  Company claims $1 billion of sales in Asia, but actual China subsidiaries are only showing millions of dollars.  Company has always used the same auditor then suddenly switched to another auditor that's not really as well known

Embedded below is the video of Gabriel Grego's presentation:




Be sure to check out the rest of the presentations from the Kase Learning Short Selling Conference.

Enrique Abeyta Short Anheuser Busch Inbev Presentation: Kase Learning Conference

We're posting up a series of presentations from the recent Kase Learning Short Selling Conference.  Next up is Enrique Abeyta who pitched a short of Anheuser Busch Inbev (BUD).  

Enrique Abeyta's Presentation: Short Anheuser Busch Inbev (BUD)

-  Thinks there will be negative earnings revisions.  Craft brewers are a threat, but contract brewing and the lower hurdle to entry in the market is the bigger story: it costs very little to start up a tiny beer somewhere and start producing.

-While most legacy beer companies built their advantage via scale and advertising via expensive mediums (TV, print) today advertising costs have come way down via online advertising and you can target the exact type of customer you're looking for.

-  Also thinks Kraft Heinz (KHC) and Disney (DIS) will face similar threats and would be short those as well (KHC: lots of micro brands starting ot popup, DIS: cost of producing content is coming down and others can do so much more cheaply)

Below is the video of Enrique Abeyta's pitch on shorting Budweiser:





Be sure to check out the rest of the presentations from the Kase Learning Short Selling Conference.

Chris Brown Short Energous (WATT): Kase Learning Conference

We're posting up a series of presentations from the recent Kase Learning Short Selling Conference.  Next up is Chris Brown of Aristides Capital who pitched short Energous (WATT).


Chris Brown's Presentation: Short Energous (WATT)

- Company's stock skyrocketed late last year on FCC approval news.  Says CEO pretty much always lies. 

- Energous has an agreement with Apple

- Company seeking to do RF or wireless charging at a distance: claims to create pockets of energy around your device to charge it. The physics behind it isn't new and technology isn't new.  The science behind it is explained in the video below but basically what they're trying to do isn't practical and is extremely exagerrated

- Lots of insider sales recently

-  Marketing is touting 'vaporware' and doing a good job of hyping things.  He thinks the company is a zero and a fraud.


Embedded below is the video of Chris Brown's presentation:





Be sure to check out the rest of the presentations from the Kase Learning Short Selling Conference.

Asher Jacobs & Jade Hu Short Stericycle (SRCL) Presentation: Kase Learning Conference

We're posting up a series of presentations from the recent Kase Learning Short Selling Conference.  Next up is Asher Jacbos and Jade Hu, Columbia MBA students who pitched a short of Stericycle (SRCL).


Asher Jacbos & Jade Hu's Presentation: Short Stericycle (SRCL)

-  See 36% downside over the next 18 months.  Fallout over recent lawsuit settlement is only in the early innings as it highlighted the company's price gouging.  Company won't be able to continue its rollup strategy with 4 turns of leverage.  Numerous accounting redflags highlight the company's deteriorating fundamentals

-  Company focuses on the medical waste market with around 80% market share.  Has expanded to other industries like shredding, environmental waste, and other areas

-  They expect the company's pricing power increases to be capped at around 5%, compared to historic increases of 18% biannually.  Competition will increase in the space as they're heavily spending on marketing to take share

-  Think one segment's revenue will drop 7% based on lack of ability to drive pricing.  Sees volume decreasing 7% (but not as severe as it was previously) as they're making price concessions to drive business.  7% revenue decline leads to a 14% EBITDA decrease

-  Company is seeing a mix shift to lower margin businesses.  Credit rating was recently downgraded, lots of debt due in 2020

-  Thinks management is focused on empire building, as incentive compensation is built on absolute adjusted EBITDA

- Expect continued earnings misses, large asset impairment.  Base case assumes 9x EV/EBITDA.  If margins stabilize and the stock gets a higher multiple, there's only 20% upside, capping risk on the short


Embedded below is the video of their presentation:



And here's a link to their presentation from the Columbia Business School's Graham & Doddsville newsletter.

Be sure to check out the rest of the presentations from the Kase Learning Short Selling Conference.

Pershing Square Building United Technologies Stake; Covers Herbalife Short

Per CNBC, Bill Ackman's Pershing Square has reportedly been building a stake in United Technologies (UTX).  Ackman told Scott Wapner that he thought the company was "great."  The company has been awaiting the closure of its acquisition of Rockwell Collins (COL).  Additionally, UTX management has said they've been evaluating splitting up into a few different entities.

Secondly, Ackman has exited his bet against Herbalife (HLF).  He had previously been outright short shares, but then this past November restructured the short via put options.  Now, he's out of his short bet entirely.  

This comes after he said back in 2013 that he'd go to the "ends of the earth" to shut the company down, dubbing it a pyramid scheme.  Shares of HLF are already up 36% year-to-date after being up a similar amount already last year.

Pershing Square has been active lately, as it also recently revealed a new Nike (NKE) position.

For more from this investor, you can view a recent Pershing Square presentation here.

Jim Chanos Bearish on Quick Service Industry, Pharmacy Benefit Management, Tesla

Short seller Jim Chanos of Kynikos Associates recently sat down with CNBC for an interview.  Here's a summary along with video and the transcript.

On healthcare:  He thinks the new tax bill will cause the healthcare industry to see deflation.  "We've been looking at the rent-seeking companies, companies that we think have existed on the periphery of the healthcare economy that basically have went after these pricing sort of gamesmanship models.  And we think that's over. We think as the pie shrinks, it's going to be tougher and tougher to justify the ability of companies to hike drug prices 1,000% or charge commercial insurers five times what you charge medicare and medicaid in the case of dialysis ... We're still very negative on the PBM (pharmacy benefit management) space, Express Scripts (ESRX) came out and reaffirmed guidance, raise it this morning.  There's not reason for independent PBMs to exist, for example."


On Tesla (TSLA):  He's still short.  He thinks the company's equity is worth zero and other competitors are ahead of them in terms of autonomy for self-driving cars (citing Waymo, Audi, and others).  Says the problem is that the company can just keep raising capital and if that train keeps going then it's an issue.  But he's still very bearish on the company and sees the CEO Elon Musk as a bit of a showman constantly using hype, press releases and product launches. 


On fast food:  "I'd be short pretty much anybody in the quick service industry besides McDonalds.  MCD still calls the tune.  They're the 6 billion pound gorilla, so to speak.  They just went to a new value menu a few weeks ago, which always impacts the industry.  It's a dog fight."

He points to the companies' transition to the asset light model in the space.  He singled out Restaurant Brands (QSR), the owner of Burger King and Tim Hortons, which has been a hedge fund favorite.  He says while these companies are getting higher multiples for running an asset light model, look at how the franchisee is doing because the restaurants themselves still have to perform.  These restaurants are being hit with higher royalty rates and rising costs, so they're starting to struggle. 


On retail:  Chanos said they had a lot of exposure to the "well known shorts" in the retail industry but has covered them so they only have small exposure in that sector right now.  They think it will be a decent Christmas holiday shopping season so he'll probably re-examine them as they bounce into 2018.

Embedded below is Jim Chanos' interview with CNBC:

Video 1:


Video 2:


Video 3:


You can also read the full transcript here.

Mathew Klody Short Domino's: Invest For Kids Chicago Presentation

We're posting up notes from the Invest For Kids Chicago Conference 2017.  Next up is Mathew Klody of MCN Capital who pitched a short of Domino's (DPZ).


Mathew Klody's Invest For Kids Chicago Presentation: Short Domino's

“Disruptors can be disrupted”.  Finding more shorts than longs right now.  The market seems to be a function of momentum, not valuation.   Look at the golden child > fallen angel phenomenon: Under Armour, Michael Kors, etc.

Patience is key – wait for the inflection point.  There is a shift coming for food. Domino’s (DPZ) is seen as a “disruptor” with strong comps/growth.   DPZ now has a demanding valuation and high leverage: >30x earnings, >20x EV/EBITDA, and 5.6x leverage.

Saturation? Management keeps moving the goalposts.  Declining international comps might be a sign.  Overexpansion? Pizza Hut finally turning the corner? Both would be a threat to DPZ.  Management uses high levels of debt to fund equity buybacks at ever higher prices.



For more from this event, check out the rest of the presentations from Invest For Kids Chicago 2017.