Archive for the ‘Articles’ Category

Current Report Card on @firstadopter Top 10 Predictions for 2014

October 3rd, 2014 1 comment

At the beginning of each year I write a top 10 predictions post. Here’s a current report card on the 2014 post thus far:

1. T-Mobile will continue to take big market-share from Sprint, AT&T and Verizon Wireless as they simply have the best value proposition in the industry: good enough quality (far better than Sprint) at a lower price.

Looking good.

2. Microsoft will be forced to lower the price of the Xbox One console to compete with Sony PS4’s sales dominance.


3. Apple will launch a larger screen-size iPhone, which will be a huge success leading to significant earnings acceleration.

Looking good.

4. The rise of little-to-no profit margin Chinese Android smart-phone companies like
Xiaomi will compress margins at Samsung Electronics.


5. Amazon will launch a Kindle Fire phone with a free or low-cost data plan like FreedomPop. It will not get traction just like the Kindle Fire tablet. Amazon’s media sales growth rate will mysteriously tumble in early-to-mid 2014 due to comp-ing the 3P to 1P ebook accounting shift, which added billions of misleading revenues in 2013.


6. Electronic Arts and Activision will both disappoint the street as gamers revolt at the publishers’ deteriorating game quality.

We’ll see. Destiny was a critical disappointment and Battlefield Hardline got delayed.

7. Sears Holdings’ digital transformation strategy into e-commerce, digital marketing, and 3rd party marketplaces will fail miserably.


8. The Zynga turnaround will fail leading to a large layoff.

Looking good.

9. Uber’s private valuation will sky higher as the startup has a killer profitable business model with a powerful viral network effect. The company will eventually establish a platform for other verticals outside of transportation.


10. Twitch.TV and Oculus Rift virtual reality headset gaming startups will both become massive success stories.


Categories: Articles

Don’t Forget the “Hedge” in Hedge-fund

September 16th, 2014 No comments

Recently a large pension fund decided to give up on investing in hedge-funds citing complexity, high fees, and lack of scale. This news sparked a slew of articles saying this was a watershed moment on how hedge-funds as an asset class underperform and weren’t worth their fees.

Yes the vast majority of hedge-fund managers do not perform well enough to justify their fee structure, similar to active fund managers. However I do think one must grade hedge-funds in a bit more nuanced fashion.

Hedge-funds are hedge-funds because they often “hedge” and have market net exposure lower than a 100% long portfolio. If a typical hedge-fund has net exposure of 50% vs. the market, it is bound to underperform the market during big up cycles, but if it can provide a net return above the net exposure it is worth the fees.

Any capital allocator can easily find cost-effective methods to get long exposure to the market through passive index or futures strategies. Finding true alpha generating investment managers is much more difficult.

Hedge-funds are attractive to their clients because they should provide uncorrelated returns, true “alpha” relative to their net exposure to the market, and strong returns through a full up/down market cycle. They should be graded on those measures.

Categories: Articles

Microsoft Xbox One Console Mark-downs

February 9th, 2014 1 comment

With all the channel checks showing a dramatic slow-down (Link) in next generation Xbox One hardware console sales in contrast to the Sony Playstation 4 sales staying relatively better, it is not surprising to see retailers marking down the Xbox One with promotions and bundles to get their inventory moving.

1) Frys selling for $20 off



2) Newegg and another eBay seller selling for $20 off too on January 27th, 2014


3) Newegg bundling a new Xbox One and EA’s Battlefield 4 game (worth $60) for the same price as an Xbox One


4) Costco selling the Xbox One for $479.99. h/t @iansherr

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Categories: Articles

Best Buy’s Implosion was Predictable

January 16th, 2014 1 comment

Reading all these articles and sell-side notes today on how analysts and journalists were “stunned” and “shocked” at Best Buy’s holiday sales report leave me a bit perturbed.

Brian Sozzi, CEO and chief equities strategist for Belus Capital Advisors, said Best Buy’s results were "shocking." Source

There were at least a 1/2 dozen clear data-points in the past few weeks that pointed to the increasingly promotional environment and weak consumer electronics sales trends. It shouldn’t have been surprising at all. Obviously none of these so-called experts follow me on Twitter.

Read some of the data-point tweets below:

Categories: Articles

Next Generation Console Channel Checks

January 16th, 2014 No comments

1) Best Buy (posted 1/9/14) Link

2) Gamestop (posted 1/9/14) Link

3) Best Buy (posted 1/2/14) Link

4) Target (posted 1/1/14) Link

5) Gamestop (posted 12/30/13) Link

6) Walmart (posted 12/30/13) Link

Categories: Articles

Elizabeth Arden CEO Points To Weakness At Walmart

August 8th, 2013 No comments

Sometimes if you can connect-the-dots, it can give you a decent chance of predicting future results. Elizabeth Arden reported a dismal quarter today. The company missed earnings and sales by a mile and also guided next quarter and the full year way below Wall Street estimates.

The company in their press release said one of the key reasons the results were so poor was:

" due to weakness at one of our largest North American mass retail customers, both in terms of retail sales performance and replenishment rate" (Source Link)

The financial media later in the morning quickly worked their sources to find the identity of this un-named mass market retailer.

Wal-Mart is the (unnamed) retailer that Elizabeth Arden says ordered much less inventory than expected — @bobpisani $RDEN $WMT

- Carl Quintanilla (@carlquintanilla) August 8, 2013

CNBC’s Carl Quintanilla confirmed to me (Source Link) that their reporter Bob Pisani did actual "shoe leather" journalistic reporting to confirm that it was Walmart that was the un-named retailer. Reuters also reported the retailer was Walmart (Source Link).

Why is this a big deal? So what if Walmart ordered less Elizabeth Arden products? The nugget comes from what the CEO of Elizabeth Arden said on their earnings conference call this morning:

Largest mass retailer account in the U.S. has experienced negative retail sales trends and even worse replenishment trends. The replenishment trends actually accelerated in the fourth quarter despite improvement in retail trends..

This is not a unique situation to us or to our category. This is not a brand issue, not a fragrance category issue as we actually built market-share in this key account..we actually..successful in the remainder of our mass retailer accounts (Source Q4 2013 Elizabeth Arden Conference Call Link)

The CEO is basically saying this large account, which we now know is Walmart, is under-performing all their other mass retailers and the poor business trends are "across-the-board". The poor order rates are not just their account or the fragrance category.

If this CEO is accurate with his commentary, it is highly likely Walmart will report poor financial sales results and guidance when it reports next week on August 15th.

Categories: Articles

Crystal Clear Waters: SodaStream (SODA) Rollout Growth Story

December 1st, 2011 1 comment

Proven Track Record of Blowing out Street Estimates the Last 4 Quarters

Source: Motley Fool (Link), Yahoo Finance

U.S. Store Rollout up More Than Triple-Digits Year-over-year to 9550 stores

Source: Ad Age full article link


1100 new Target stores, 1140 new Staples stores, 240 new Costco stores all rolled-out in the past month. The CEO was quoted on CNBC with Herb Greenberg that Walmart “is coming”. The CEO also said at J.P. Morgan conference on 11/30/11 “retailers like Trader Joes and Whole Foods.. You will start seeing things like that in the next year or so”

U.S. Store Growth led to Triple-Digit Sales Growth in Past and Likely the Future with Recent Store Add Acceleration of +45% q/q

New Un-penetrated Countries Will Drive Years of Future Growth
SodaStream household penetration in Sweden is over 25% with several European countries in the range of 17-25%. Household penetration in the U.S. is negligible. The company just launched in Japan (press release link) in October 2011 and announced it will launch in Brazil in Q1 2012 (press release link). Changes in the corporate presentation also strong imply an upcoming launch in India (my analysis link).

CEO quote from J.P. Morgan conference 11/30/11 on U.S. business trends: “bottom-line sales are triple digit growth in the U.S. Consumables are going through the roof. So we are very excited about the prospects of a strong holiday and strong long-term growth in the U.S.”

It’s a Great Product that Saves You a Ton of Money
I use my SodaStream to make me sparkling water and soda about 3 times a day. If you drink sparkling water, buying a Sodastream is a no-brainer. Read my article (link) on how you can get an amazing 16.6 cents per seltzer liter. It also helps save the environment with less plastic bottles wasted (link), costs less (link), and is better for you nutritionally (link).

The following are some reviews on the Sodastream model I own – the Genesis. You can read all 46 customer reviews here: (Bed Bath Beyond link)



Consumables Growth is Strong and Average Spend per U.S. Consumer Bodes Well for Future
U.S. consumable growth is stunning (look above at CO2 refills y/y etc.). The CEO said on 11/30/11 that average spending per U.S. consumer is $65/year much higher than world-wide average of $34/year, which bodes well for the future as the U.S. is only 30% of SodaStream’s revenue and growing at triple-digit annual rates.

Awesome Business Model and Barriers of Entry
Not only does SodaStream make money up-front selling soda-makers, the awesome part of the business model is the 80% gross margins (DB analyst estimate) it gets from CO2 refill exchange canister business.

Along with the 9550 stores in the U.S. that sell SodaStream sodamakers, 50% of them (4785 stores) participate in the CO2 refill exchange business. Stores love this as it drives repeat customer traffic. This distribution network is a huge barrier of entry for competitors as stores are unlikely to offer a second CO2 re-fill brand at their customer service desks. Moreover SodaStream has 5 million CO2 re-fill cylinders in circulation manufactured at $10 a piece, which represents a significant capital investment. The CO2 re-fill valve is also patented.

In developed markets where there is well-financed competition such as Sweden, SodaStream still dominates at over 80% market-share due to its brand, first-mover advantage, and distribution network.

Europe Revenue Risk
I believe the developed European market macro risk is over-stated. The developed markets in Europe (look above) are primarily 75%+ consumable revenue streams for SodaStream. Even if the macro situation worsens, it is high unlikely a family will cut down on $15 consumable CO2 re-fill every few months when in fact SodaStream saves them a ton of money vs. buying bottles. It’s a stretch to say any family will stop drinking sparkling water and go back to tap water to save that $15.

Europe growth has been overall strong, but even if it goes down to flat or single-digits, the triple digit growth in the U.S (already 30% of revenue) and new markets such as Japan and Brazil still give the company years of 20%+ growth runway.

Valuation and Short Interest
Most of Wall Street estimates for 2012 EPS are around $2.00 in USD earnings (Note Yahoo Finance estimates are in euros). Using the $2 number, the stock at today’s close of $29.85 is trading at 12.8Xs 2012 EPS ex-cash growing sales at 39% y/y in the last quarter.

Using the latest Nasdaq 11/15/11 short-sale data (link), short interest has increased 12% in the previous 2 weeks to 7,478,030 shares. That means roughly 54% of the float is short. High short interest to float numbers such as this have preceded massive short covering squeezes of 50-70% upward stock price moves in as little as 4 weeks (Examples: OCZ and BKS in the past 2 months).

Long-term annual targets

I believe SodaStream is the best “early innings” rollout growth story in the market. They make a great product that saves people money and is a proven household penetration winner world-wide. 

The company has blown out Wall Street estimates the last 4 quarters, accelerated U.S. store distribution 100%+ y/y +45% q/q, launched in Japan in October, and will launch in Brazil in Q1 2012. For all these reasons including the CEO repeatedly being quoted on Bloomberg, CNBC, and at Wall Street conferences about being “very excited about the strong holiday” I believe it’s highly likely SodaStream will post strong Q4 results.

Moreover the company will likely give strong 2012 guidance of at least 20% revenue growth and EPS growth of 25% as the CEO repeats those long-term annual growth targets on a monthly basis and in corporate presentations everywhere he goes.

Research Links
1. Official company Powerpoint presentation September 2011 (link)
2. J.P. Morgan conference 11/30/11 Powerpoint presentation (link)
3. My metrics financial model spreadsheet (link)

Categories: Articles

SodaStream (SODA) adds many Target, Staples, and Costco stores this quarter, which are not in Wall Street estimates

November 3rd, 2011 No comments

Sodastream CEO presentation on September 8, 2011 Link

Notice on “Slide 39” during a presentation the SodaStream CEO gave in September 2011; there is nothing on Target, Staples, and Costco.

Using the “Where to Buy” feature on the SodaStream website (Link), I find the product is now available in about 1/2 of Costco locations (a rough sample estimate) and every Target and Staples store in my area (Note: this may not be the same across the country). 

A friend of mine in California said SodaStream was recently made available at his local Costco. My wife told me she saw SodaStream being demo-ed and sampled last weekend at our local Costco on the East Coast. I called that Costco up and an employee told me they had 100 units in stock.

I drove to my local Staples tonight and saw a huge end-of-aisle SodaStream display with 12 units right out in front when you walk in. It was right next to the Green Mountain Keurig display. I talked to an employee who told me he set the display up TODAY and they have one more box of inventory in the back. I estimate this Staples store got 20 units shipped-in.

I drove to my local Target and found the SodaStream display in the home kitchen area next to the microwaves and water filters. There was shelf space for 20 units. It looked like about 5 units were sold. I used the inventory checker with one of the units and found there was no more stock in the back. A Target employee told me it was a recent launch.

In previous SodaStream conference calls, management talked about a small 12 store test trial at Costco, which we now know had a large roll-out ramp up in the past week to more locations. Management also talked about testing at a big box mass-market discount retailer in the past year. Now we know that was Target with a massive roll-out this quarter. The Staples roll-out today is another positive surprise.

Costco has 432 stores in the U.S. Target has 1767 stores in the U.S. Staples has 1575 stores in the U.S.  I do not know the exact store roll-out numbers, but from a dozen zip code searches on the Sodastream site’s “Where to Buy” feature it looks pretty significant across the board.

If you do the shipped-in math of 20 units per added Target and Staples stores and 100 units for 1/2 of the Costco stores for $80-120 per unit, it is easy to see upside vs. the Wall Street estimate for U.S. SodaStream revenue this quarter. Please note this is U.S. revenue only. I have no visibility on their sales in Europe.

Categories: Articles

Sodastream (SODA) Twitter Misinformation

June 14th, 2011 3 comments


If you look at today’s SODA chart you can see a little after 2PM there was a big dive in the stock and a big increase in trading volume. After an initial bounce, the stock proceeded to sell-off the rest of the day.


Reuters reported around 2:08PM that Coca-Cola said their Freestyle Fountain Machine should be in 80 markets by year-end.


As you can see, this led many people on Twitter to imply Coca-Cola was now “competing” with Sodastream. The action on the stream even got @StockTwits to tweet about SODA’s move to all 125,000+ followers on StockTwits. Even @Benzinga, a leading financial news site with 11,800+ followers, tweeted about the SODA move.

The only problem is if anyone did any basic research at all you would have found the following:

1) The Coca-Cola Freestyle Fountain machine is not new. It’s been around since 2009. Link

2) The Freestyle machine is huge and is primarily marketed to restaurants. Link


3) The Freestyle machine costs 30% more than a regular soda fountain and leases out for $320/month. Link

4) And it costs $18,000. Link


So does a product that was introduced in 2009 primarily for restaurants like Subway with ingredients that cost 30% more, and costs $18,000 per machine compete with a $100 Sodastream product sold to consumers at home? Really?

It’s clear the Coca-cola is “now competing with Sodastream” innuendo all over Twitter and the trading news sites today is complete and utter bunk.


Even CNBC’s Herb Greenberg, a noted skeptic of Sodastream in the past, agreed that SODA traded on a “false rumor” today.

I love Twitter. I love StockTwits, but let’s try to do a little bit of leg-work and research before we tweet and re-tweet information. That’s all I ask.

Disclosure: At time of writing, the author is long Sodastream stock which he scaled in on today’s misinformation driven afternoon dip.

Categories: Articles

Apple iPad Impressions / Review

April 3rd, 2010 1 comment

I walked into my local Apple store around 3:30PM today. There was a line of 3-4 people waiting for the iPad demo station outside. It took about a 5 minute wait to get my hands on a store demo iPad. The store employees told me they were sold out of the 64GB model, but had plenty of the 16GB and 32GB SKUs in stock. This is good news for flash memory manufacturers like Sandisk as it looks like people are leaning toward using it as a media center for all their movies, music, and photos.

I got to play around with it for about 15-20 minutes. Here are my initial impressions.

-The screen is the BEST I have ever seen on a portable device, even better than the LED display on the MacBook Pro. Stunning clarity and colors. Steve Jobs made the right choice going with an IPS panel. This IS an amazing digital photo album device.
-The extra screen space makes huge difference over the iPhone in productivity apps such as the calendar and email. You can use a physical switch to lock in orientation, which is a great new feature.
-It’s fast. Felt like 50% faster than an iPhone.
-The Book reader app / store is as good as everyone says. Amazon should truly be worried about Kindle sales.

-It felt heavy after holding it a while. I recommend getting a case with a kick-stand because it is going to get tiresome holding it for long periods of time.
-iPhone apps do not look good on the bigger screen with ugly pixelation. Not a big deal as most widely used apps will be updated for the iPad.

-I will probably buy the 3G version later this month.
-This is the ultimate web-surfing on the couch and digital media consumption device.
-It did seem like more people in the store were there to “check it out” than buy it. In my time there, I only saw one sale.

Categories: Articles