Mike Furey: ‘I picked up a small position in NTMD puts the morning after Jim Cramer pumped the stock on CNBC. I’ve almost tripled my investment so far.’
☞ NTMD fell another 77 cents Friday, to $8.72. But it’s still valued at $265 million. Why would you pay that – or anything – for a company with a single product that isn’t selling well enough to break even? You never know; but if your puts expire in June or September, I’d just hang on.
(JP Morgan, UBS and others continue to recommend the stock, as they have all the way down. But that may tell you more about JP Morgan, UBS and the others than about NTMD.)
Jesse Frey: ‘FMD went up 9% on Friday. How much of that do you think might have resulted from your tip?’
None of it.
In my fondest dreams, some of you saw this suggestion Friday morning and bought shares at the open. The stock gained $3.64 on the day. But of the 3.7 million shares traded, I’d be amazed if even 25,000 came from readers of this site. Many of you are fabulously wealthy (and all but three of you are surpassingly charming and wise). But you have the good sense to come here for recipes and politics, not stock tips.
That said, I think FMD remains a buy. Here’s what a smart friend writes:
This is a long term, multi-year compounding play. What would you pay for a company that will consistently grow quality earnings at 30-40% per year for the next decade? Even after two very good days, it’s just absurdly undervalued at 11x conservative street estimates of forward earnings. Also, there are still 15MM shares short out of 30MM float. The coming squeeze has got to push this thing up another 15 points before it even achieves a neutral price (at least to my way of thinking).
FMD 1) has no debt, 2) is growing revenues and earnings at 40%+ per year, 3) has a very conservative forward PE multiple of 11x (according to street estimates – a realistic forward PE multiple of 8x, according to me), 4) has significant competitive advantage vs. other players in the field based on proprietary access to student loan performance data (competitors don’t have the loans to track, the experience in management, or the patience to wait out the performance curves – usually 5-6 years given the nature of the loan), 5) for the same reasons as #4, enjoys significant and sustainable barriers to competitive entry, 6) operates in an industry growing at an estimated 30%/year, 7) is over 50% owned by management, 8) is endeavoring to diversify its customer set with a full sales pipeline, 9) has recently been buying back stock at a rapid pace and indicated it will continue to, 10) is about to hit an inflection point in their business model which should accelerate growth even more (student loan servicing book achieves critical mass and starts to substantively contribute to operating income; residual benefit from their securitizations should start to kick in), and, inexplicably, 11) nearly 50% of the float is sold short – due to the “smart money” misunderstanding #s 4, 5 and 8. Every day I scratch my head trying to figure out what I could be missing, but I remain mystified – so I buy more.
Oh! And it has a Return on Assets in the high 30s and a Return on Equity in the high 40s — while funding a near 50% growth rate. And it has just recently broken through its 200 and 50 day moving average.
Caveats I can obviously live with include: 1) Potential for the Federal Government to get reenergized on the student loan sector, stunting industry growth, 2) High intensity of insider ownership, while generally a positive, will mean fairly high and continuous levels of insider sales as key managers look to diversify their assets, 3) Irrational customer/partner decisions could create negative short term catalysts (e.g. resigning business to pursue less productive/profitable approaches), 4) Questions as to whether entrepreneurial management can continue to successfully drive profitable, hyper growth in a much larger company and navigate multiple, complex partner relationships.
BACK TO POLITICS
. . . A series of political missteps has raised questions about the Bush administration’s candor, competence and credibility and left the White House off-balance, off-message and unable to command either the nation’s policy agenda or its politics the way the president did during his first term.
This week, newly released video of Bush listening passively to warnings about the dire threat posed by Hurricane Katrina and a report that intelligence analysts warned for more than two years that the insurgency in Iraq could swell into a civil war provided fresh fodder for charges that the president ignores unwelcome alarms. . . .
WILLIAM RIVERS PITT ON THE STATE OF OUR LEADERSHIP
‘No One Could Have Anticipated …’
By William Rivers Pitt
t r u t h o u t | Perspective
Thursday 02 March 2006
The video is gut-wrenching.
There they sit, a whole room full of hurricane experts and disaster managers, shouting down a telephone line at George W. Bush, warning him a full day ahead of time that Hurricane Katrina is a catastrophe waiting to happen. There stands Max Mayfield, Director of the National Hurricane Center, emphatically explaining that Katrina is far larger and more dangerous than Hurricane Andrew, that the levees in New Orleans are in grave danger of being overtopped, and that the loss of life could be extreme.
There sits the much-maligned FEMA Director Michael Brown, joining in the chorus of warnings to Mr. Bush and giving every appearance of a man actually doing his job. “This is, to put it mildly, the big one,” says Brown. “Everyone within FEMA is now virtually on call.” Brown goes on to deliver an eerily accurate prediction of the horrors to come within the Louisiana Superdome. “I don’t know what the heck we’re going to do for that, and I also am concerned about that roof,” says Brown. “Not to be kind of gross here, but I’m concerned about (medical and mortuary disaster team) assets and their ability to respond to a catastrophe within a catastrophe.”
And there, of course, is Mr. Bush, sitting in a dim conference room while on vacation in Texas, listening to all the pleas for immediate action on the telephone. With an emphatic hand gesture, Bush promises any and all help necessary. “I want to assure the folks at the state level that we are fully prepared to not only help you during the storm,” says Bush, “but we will move in whatever resources and assets we have at our disposal after the storm.” After the delivery of this promise, however, Bush goes mute. No questions, no comments, no concerns. As if to foreshadow what the people of New Orleans received from their leader, Mr. Bush finishes the conference by delivering a whole lot of nothing.
That’s the video, 19 hours before the bomb struck New Orleans. It is gut-wrenching because everyone now knows what came next. The storm struck, the waters rolled in, and thousands were left to die. Days passed with no help reaching the city. Images of corpses left to rot in the streets were broadcast around the globe.
It is gut-wrenching, more than anything else, because of this: four days later, when questioned about his flaccid response to the catastrophe in Louisiana, Bush stated, “I don’t think anybody anticipated the breach of the levees.” Right. No one anticipated the breach of the levees except the Director of the National Hurricane Center, the Director of FEMA, and a half-dozen other experts who implored Mr. Bush to take this storm seriously a full day before the hammer dropped.
No one could have anticipated it? That has a familiar ring to it.
No one could have anticipated the failure of the levees.
No one could have anticipated the strength of the insurgency in Iraq.
No one could have anticipated that people would use airplanes as weapons against buildings.
No one could have anticipated these things … except all the people who did. . . .
BILL GROSS ON THE STATE OF OUR UNION
One more reason to globally diversify your mutual funds.
Quote of the Day
The Beardstown Ladies’ Common-Sense Investment Guide. A classic from the investment club that has outperformed Wall Street gurus three to one. ("It’s easy to get investment advice these days. But in this volatile market, it’s important to separate the faddish from the trustworthy.” The Beardstown Ladies, it turned out, had widely underperformed Wall Street.)~American Bookseller's December 1997 list of recommended investment books.
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