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Dr. Kellegro initiates coverage of BWLD with a D/5- rating.
Sold short BWLD at $41.89.
Further information to follow.
Dr. Kellegro initiates coverage of GMCR with D/7- rating.
Sold short GMCR at $80.65.
http://drkellegro.com/?p=120
GMCR Is A Murderer
http://drkellegro.com/?p=120
GMCR’s company logo may as well be a coffee bean with arms and legs holding an axe in one hand and the head of a bear in another. The stock is punishing short sellers to no end. At one point this was one of the most heavily shorted names in the market. However, as of late, the percentage of shorts in the stock has been dropping rather substantially due to the persistence of the stock on the upside.
The company has the bears to thank for fueling this type of move up. Makers of single serving coffee machines and cups make for a good drink, but a terrible long term investment. It seems that individuals and institutions forget about the fact that Wall Street loves the latest gimmick. It gives the institutions that are recommending the stock something to brag about as the price soars; it gives investors in the stock hope that they will be able to find one of these every year, thereby retiring within 5 years; it gives bears something to seethe over and talk to other bears about, often times angrily; and it gives consumers that buy the particular item something to talk about around the water cooler.
All of the talking, bragging and seething doesn’t change the fact that the company is going up based on momentum alone. And to this date, in the entire history of freely traded capital, there has never been one of these types of names that has stuck. They seem to die sooner than most expect, often times taking an entire freighter of momentum types with them, who come to find that their “sophisticated” fundamental calculations of what the company should be earning in 2012 mean nothing once the momentum dies.
I have seen numerous articles on the internet arguing against its valuation and for its valuation. Everything from inventory, to patent, to cash flow analysis. It all means nothing. The company is now in the hands of frightened bears and ecstatic momentum players. The first step of the fall will be when frightened short sellers in the stock stop capitulating. The second step in the stock will be when company management, impressed by their ever-rising stock price, starts making decisions that I would classify more as power flexing rather than smart decision making. Wait a second…..could it be that both of these things are in the process of occurring now?
GMCR recently made a power flexing type move to buy Diedrich Coffee. A bidding war ensued with Peet’s Coffee and of course, GMCR had more inches in their pants, and they ended up winning the bidding war. In a bidding war, it is only natural that unless you have an undiscovered gem in your hands, you are paying a clear premium. Diedrich is a coffee company, there are no such thing as undiscovered gems in the coffee business. Therefore, it is fair to surmise that GMCR overpaid for Diedrich. But who cares? Their stock price is at $80! They have weapons in the coffers that they haven’t even touched yet!
It’s a fair argument for the bulls on the surface. Why wouldn’t any bullish investor in GMCR think that the purchase of Diedrich is just the beginning of the companies dominance of the coffee space? Dr. Kellegro is in the business of revealing truths and so I will tell each and every bull why it is not the beginning of their dominance of the coffee space, but rather the end.
The purchase of Diedrich was not a business savvy decision based on a value judgement. DDRX was a stock that has risen from less than $1 to $25 in less than a one year time frame. In that time frame that stock became a favorite amongst short sellers, who undoubtedly assisted with the momentum to the upside and the bloated valuation. Where was the value in DDRX?
The purchase of Diedrich by GMCR, especially in light of the bidding war that ensued, was nothing more than a move based on GMCR having an extraordinarily high stock price that management knows they don’t have the capability of supporting unless they create growth through acquisition. Yes, these types of moves work for extraordinary companies that end up becoming staples in everyday human life. However, this type of move will never work for a retail company…and that’s what GMCR is…they are a maker of coffee machines and the single serving coffee cups that accompany them…nothing more.
You’ve seen now that management at GMCR has shown their hand. They have a weak hand that they are attempting to mask through acquisition…a fairly common practice actually, especially after a massive stock run. The ridiculous acquistion of Diedrich coffee paired with the capitulation of the shorts in the stock over the past few months makes GMCR an ideal short candidate to begin allocating into at these levels.
I am Dr. Kellegro…this is Day 6.
Ten Monumental Events For The Next Ten Years
Published on January 6, 2010 from www.drkellegro.com
How will the markets, economy and world look in 2020? What follows are Dr. Kellegro’s guesses for what transpires going forward. As a disclaimer of sorts, I believe in Bruce Kovner’s philosophy that he outlines in the original Market Wizards. The basic gist of it being that you must be able to imagine the unthinkable. For example, in 2000 if I would have told you that Bear Stearns and Lehman brothers would be out of business, the Dow would be at 10,500 and an African-American with a Muslim name would be President of The United States…you would have told me to get lost. The unthinkable has a way of becoming reality…so we must think along the lines of the unthinkable in order to have any chance of even being 20% accurate.
1. After suffering at the hands of the two party system and seeing no sign of better times ahead…the American voter will embrace a third party, electing to office a President from this party and as a result of good times for the country, this third party will come to replace either the Democrats or Republicans as the party of choice for most Americans.
2. Due to talk of global food shortages taking place during the first few years of the decade, there will be an abundance of new farms and water systems created to prevent such a disaster. As such, food production will soar creating a surplus of crops that will end up depressing commodity prices for years on end going into the final years of the decade.
3. BRIC countries…with the exception of Russia, will experience social upheaval that renders whatever economic advancements they have made useless. One of the BRIC countries will collapse completely under the weight of this social upheaval creating a medium- term financial crisis.
4. The resurgence of the United States and Western Europe as the economic powerhouse of the global economy will become apparent as we approach the end of the decade, with US GDP growth reaching levels that rival the best of times.
5. Oil prices will plummet into the single digits with gasoline being sold for less than $1.00 per gallon due to economic issues in the BRIC countries and the prevalence of alternative fuels for the entire world. By the end of the decade, nearly all vehicles will be largely independent of gasoline.
6. As a result of depressed oil prices, the OPEC nations, especially Iran and Saudi Arabia, will experience severe economic issues that cause a moderation in the governments. The monarchy of Saudi Arabia will fall and the country will be split into two parts…the larger being more progressive and the smaller of which is a fanatical Wahhabi government that will be seen as the next threat to the civilized world. Iran will experience a resurgence on the global stage as the Islamic government ceases to exist and the country becomes a leader for progressive thought throughout the Middle East.
7. Goldman Sachs will be taken private and then sold off in pieces as the nature of their corrupt behaviour over the past several economic catastrophies becomes inescapable.
8. Housing prices will remain largely unchanged for the entire decade, as an exponential rise in mortgage rates causes homes to become unaffordable for a majority of buyers.
9. Due to a losing effort versus the drug trade, Mexico will legalize and regulate all illegal drugs in the country. This will stimulate Mexico’s economy and lead to the country being one of the top tourist destinations for the world. Mexico, as a result of this policy, will experience of a golden age of wealth and partying.
10. After being voted out of office after his first term, Barack Obama will replace Jay Leno on The Tonight Show. Ratings will soar and by the end of the decade, Barack Obama will be seen as the second coming of Johnny Carson.
Ten Monumental Events For The Next Ten Years
Published on January 6, 2010 on www.drkellegro.com
How will the markets, economy and world look in 2020? What follows are Dr. Kellegro’s guesses for what transpires going forward. As a disclaimer of sorts, I believe in Bruce Kovner’s philosophy that he outlines in the original Market Wizards. The basic gist of it being that you must be able to imagine the unthinkable. For example, in 2000 if I would have told you that Bear Stearns and Lehman brothers would be out of business, the Dow would be at 10,500 and an African-American with a Muslim name would be President of The United States…you would have told me to get lost. The unthinkable has a way of becoming reality…so we must think along the lines of the unthinkable in order to have any chance of even being 20% accurate.
1. After suffering at the hands of the two party system and seeing no sign of better times ahead…the American voter will embrace a third party, electing to office a President from this party and as a result of good times for the country, this third party will come to replace either the Democrats or Republicans as the party of choice for most Americans.
2. Due to talk of global food shortages taking place during the first few years of the decade, there will be an abundance of new farms and water systems created to prevent such a disaster. As such, food production will soar creating a surplus of crops that will end up depressing commodity prices for years on end going into the final years of the decade.
3. BRIC countries…with the exception of Russia, will experience social upheaval that renders whatever economic advancements they have made useless. One of the BRIC countries will collapse completely under the weight of this social upheaval creating a medium- term financial crisis.
4. The resurgence of the United States and Western Europe as the economic powerhouse of the global economy will become apparent as we approach the end of the decade, with US GDP growth reaching levels that rival the best of times.
5. Oil prices will plummet into the single digits with gasoline being sold for less than $1.00 per gallon due to economic issues in the BRIC countries and the prevalence of alternative fuels for the entire world. By the end of the decade, nearly all vehicles will be largely independent of gasoline.
6. As a result of depressed oil prices, the OPEC nations, especially Iran and Saudi Arabia, will experience severe economic issues that cause a moderation in the governments. The monarchy of Saudi Arabia will fall and the country will be split into two parts…the larger being more progressive and the smaller of which is a fanatical Wahhabi government that will be seen as the next threat to the civilized world. Iran will experience a resurgence on the global stage as the Islamic government ceases to exist and the country becomes a leader for progressive thought throughout the Middle East.
7. Goldman Sachs will be taken private and then sold off in pieces as the nature of their corrupt behaviour over the past several economic catastrophies becomes inescapable.
8. Housing prices will remain largely unchanged for the entire decade, as an exponential rise in mortgage rates causes homes to become unaffordable for a majority of buyers.
9. Due to a losing effort versus the drug trade, Mexico will legalize and regulate all illegal drugs in the country. This will stimulate Mexico’s economy and lead to the country being one of the top tourist destinations for the world. Mexico, as a result of this policy, will experience of a golden age of wealth and partying.
10. After being voted out of office after his first term, Barack Obama will replace Jay Leno on The Tonight Show. Ratings will soar and by the end of the decade, Barack Obama will be seen as the second coming of Johnny Carson.
A dormant period is followed by a period of activity. In light of my dormancy, I could see no better time than the opening to a new decade to reemerge. And so Dr. Kellegro, in all his wisdom, has come forward to document the next 1096 days of his reemergence.
The documentation will not only be for entertainment but for definitive proof that Dr. Kellegro’s methodologies continue to be superior to those of his peers across all categories. I use the word “continue” not out of paper trading delusion but out of circumstance. The circumstance being circa 2004 Dr. Kellegro’s methodologies were documented to be superior as his macro hedge fund was # 1 in its class with a triple digit percentage return year over year.
And so I have looked into the eyes of my adversary and I see much of the same. Except today, I see an even larger propensity for deception. The type of deception that allows elimination of all but a chosen few name players on Wall Street. The type of deception that renders traditional analysis limp and incomplete. The type of deception that disallows retail investors from having prolonged periods of success. The type of manipulation that screams out in its blatant regard for only itself.
I see this manipulative behavior as a chronic condition of the financial markets. The only question at any given moment is at what amplitude is the level of manipulation? How far reaching are the lies? Dr. Kellegro is the filter…Dr. Kellegro is the truth. And with that truth, comes the ability to profit.
1096 days….1096 eventful and glorious days to document thoughts, opinions, analysis…the sum of which equal TRADES..or you can call them picks. I see a littered field of websites, blogs if you will, that provide thoughts, opinions and analysis…but stop at the sum of all these parts, which is trades. After all, what is the purpose forcing an erection of your frontal lobe if you stop at simple analysis? Any gentile can come up with a hypothesis formed from a millenium of study, but few are those who are able to compose those thoughts into profits. Even fewer are those who are able to do this consistently over a 1096 day time frame. And only the especially insane and eccentric of those fewer few are willing to document all of it in a public diary.
Dr. Kellegro is the fewest fewer of the few. And so the journey commences…..
TRLG Short Sale Synopsis
Dr. Kellegro has initiated a substantial short position in TRLG after Lazard upgraded shares of the stock to buy from hold only a couple months after lowering the shares to hold from buy. Typically, incoherent moves like these by members of the analyst community point to conflicts of interest that involve courting future business from the company involved in the upgrade. The ratings system on Wall Street has been used as leverage against companies to win further business from them for the firm initiating the upgrade. An appreciation in market value such as the one TRLG experienced today is traded for future service income to that investment firm. It is no coincidence that shortly following the November downgrade of TRLG a meeting took place between Lazard and TRLG. And now comes the upgrade, as the promise of further business either from the company itself or the executives involved in the company is a virtual guarantee.
What is important to note about TRLG – as a company - is that it has been losing market share in its segment versus competitors. Given economic conditions specialty jean companies are not easily getting the $75-$300 price tag that their jeans command. In TRLG’s case they have taken on an ambition expansion plan for individually branded stores at precisely the wrong time. I am sure that in management’s mind opening new stores while lease rates are favorable and choice locations are becoming available will make their venture successful. However, what management has not taken into account is that TRLG is a fart in the wind. A fart in the wind that attracted some attention for the past few years but is now fading back into nothingness. And now they are adding to their potential liabilities by taking on long term leases and the expenses of opening 100+ stores over the next however many months/years. Add to that the fact that they have been losing focus, moving away from the bread and butter of the company - which has been jeans - into jackets, shirts and apparel that will make their burgeoning number of stores look more “consumer friendly”. After all, you can’t have 100+ retail stores that only sell different colored jeans.
Now let’s move to the insider selling. It seems that insiders at the company enjoy selling shares between the $20 – $30 range, as they too realize that their share price and their brand is a fart in the wind. The insider selling between $20-$30 over the past year has not just been substantial, it has been monumental. With the founder of the company, the orginator of the fart, if you will, dumping a majority of his shares over the past two years. Now I ask you, if their blindly ambitious plan of expansion was as monumental as the company or Lazard would have you believe, why would the founder and CEO of the company be dumping shares of TRLG at such an astounding rate?
In TRLG you have the perfect confluence of factors:
1. A specialty retail stock that did what specialty retail stocks do during their life cycle: go from obscurity to becoming a recognizable brand. The life cycle becomes complete when the fickle public moves onto the next specialty retail name. TRLG is in the latter stage of this life cycle as consumers are beginning to move away from the brand.
2. An inept management team that is A) trying to keep the stock price inflated with pie in the sky dreams of success through expansion B) dense enough to actually believe that their plan of expansion will lead to increased revenue and brand recognition independent of consumer spending habits C) unfocused and moving away from the business that got them to this point in the first place.
3. Insider selling that is not substantial but monumental, with the leader of the pack being the founder of the company himself.
TRLG, with its current market value, is a deception and an outright lie. It should not only be avoided by prospective investors, but taken advantage of by those astute enough to recognize the vast number of flaws apparent within the company.
Also available at http://drkellegro.com/?p=68
Dr. Kellegro initiates coverage of TRLG with a F/70- rating.
The following factors influenced the rating and decision to sell short TRLG shares:
1. A specialty retail stock that did what specialty retail stocks do during their life cycle: go from obscurity to becoming a recognizable brand. The life cycle becomes complete when the fickle public moves onto the next specialty retail name. TRLG is in the latter stage of this life cycle as consumers are beginning to move away from the brand.
2. An inept management team that is A) trying to keep the stock price inflated with pie in the sky dreams of success through expansion B) dense enough to actually believe that their plan of expansion will lead to increased revenue and brand recognition independent of consumer spending habits C) unfocused and moving away from the business that got them to this point in the first place.
3. Insider selling that is not substantial but monumental, with the leader of the pack being the founder of the company himself.
TRLG, with its current market value, is a deception and an outright lie. It should not only be avoided by prospective investors, but taken advantage of by those astute enough to recognize the vast number of flaws apparent within the company.
Further details are available here http://drkellegro.com/?p=68
Dr. Kellegro initiates coverage of GSIGQ with an A/10+ rating.
http://drkellegro.com/?p=55
Posted 1/4/10
Briefly…a long position was taken in GSIGQ. This is another bankrupt company that has been mismanaged for some years. The financed acquisition of Excel led to substantial debt which was renegotiated in bankruptcy. There is substantial shareholder activism taking place here, as the company does present value to shareholders once it has cleared up its delayed filings, some going back more than a couple of years. The fundamentals of this company are more difficult to judge due to the lack of complete information. However, it can be assumed that management has not completely sunk this ship and the value to shareholders will be realized over the long term.
- Dr. Kellegro
Dr. Kellegro initiates coverage of AVRNQ with a B/10+ rating
Posted 1/4/10
http://drkellegro.com/?p=55
Briefly…a long position was taken in AVRNQ. This is a bankrupt company that has experienced a severe dislocation between the reality of the companies situation and the stock price since filing for bankruptcy during the first half of 2009. There is a significant amount of shareholder activism taking place and rightfully so. Given the current fundamental state of the company, I believe that shareholders will succeed in their request to preserve the value of the stock in the company.
- Dr. Kellegro
http://drkellegro.com/?p=60
Short TRLG @ 20.40
Lies abound…deceit is plentiful.
As such, Dr. Kellegro has initiated a substantial short position in TRLG after false assumptions were made this morning from an analyst at Lazard.
Further details to come.
A formal introduction of myself and my methodologies will be made later.
- Dr. Kellegro