GregS

Has anyone seen a COVID-related charge larger than Markel's? TRV had $86m and CB $13m.

A retroactive change to the contracts would be unconstitutional, full stop. Of course, that doesn't prevent the market from imposing a discount until it's resolved. Poor drafting is a larger risk, and there will be judges that make stupid decisions, but insurance companies will win most of these suits or settle on favorable terms eventually. Plaintiffs' lawyers are selling their clients hard on a hope and a prayer. Clients getting played.

IIRC, he used margin to increase the BRK position which is why it's so large. I wish him the best of luck and good health. I know I wouldn't want to quit right now being down as much as he likely is even if that was the plan, but I suspect investors forced the issue. I think you can be a concentrated investor or you can raise funds through hagiographic media articles but I think it's very hard to do both for long. I expect he'll be back doing something in due time. Hard to keep guys like this away from the game.

Regardless of government checks, I think the coronavirus will be good for their business. Mobile check deposit is a cash cow that will continue during the crisis. A lot of people will try it for the first time as they won't want to use the ATM. They will become recurring customers. That said, I can't imagine the sales pipeline for their ID technology looks very good right now. But at least they will be able to fund operations with the check business.

Bought BRK.B - first time I've ever owned it.

Not sure why that tweet contended that Mitek "buried" the info on their lawsuit. They discussed it on the call in the CEO's prepared remarks. I can't handicap the outcome of the litigation, but Mitek pursuing a declaratory judgment action is an offensive action by Mitek. They decided not to sit around anymore while USAA threatens and pursues lawsuits and are seeking a court declaration that their software doesn't infringe. They probably should have done it sooner but they probably thought Wells would win. Also notable is that the Eastern District of Texas, where USAA sued Wells Fargo, is considered the friendliest in the nation to patent trolls.

To extend to Cigarbutt's point, there is a lot of nuance to look at. Declining inventories can mean the company left sales on the table. It also means the inventory decline probably will need to be reversed in short order. Rising inventories outpacing sales can be due to aggressive store expansion. And while I mention rising GMs as a good thing, sometimes lower prices can increase sales and gross profit dollars, driving operating leverage, increasing profits and ROIC. If you want an example of a company that manages inventory well, look at TJX. Their calls give color on inventory which can sometimes fluctuate with store expansion and opportunistic buys, but the main thing is they never let things get too far out of whack. For an example of using inventory changes to predict future sales/profit direction, look at DSW the last few years. In 2015-16, inventory increases were outpacing sales increases, signaling trouble with comps and future margin pain. In early 2017, they showed signs of getting this under control and results turned positive again (I sold mid-2018 so haven't followed since then).

If an inventory write-down or write-off is material it should be disclosed. Check the 10-Ks and Qs if they haven't discussed in the PR or conference call. The best way to figure out what's going on is look at gross margin. If they are discounting heavily or writing off, it will show up there as COGS will be higher relative to sales. The best situation is inventory levels dropping while revenues and GMs are rising. That would indicate product is flying off the shelves.

Re #1, I think online fulfillment is more expensive no matter what. The hard thing about in store is you can't just start pulling stuff off shelves, you need to revamp the whole supply chain so you are getting the right inventory into the store, you need to modify stores to pack and ship, in store pickup, curbside, whatever you're doing. It requires investment and change in operations. At our local Wal-Mart in store pickup is in some dank closet in the back, just a terrible experience. Our local TGT hasn't been remodeled and so the experience is marginally better. This will only work if they redesign/remodel stores and distribution, but TGT is doing just that. You also need a broad enough store base to make ship from store and pickup a good experience vs AMZN's fulfillment. Bottom line: downward margin trends are likely to continue for TGT and others but the ones that invest in this will retain/gain share. Really, the only companies that can do this at large enough scale to compete online with AMZN are WMT and TGT because of their resources to invest and broad store base (and by compete I mean still distant 2nd/3rd but at least in the game). Smaller chains are going to see higher costs for a worse guest experience than these three. For 2, and this is related to 1, Target is doing major investment right now with store remodels in particular. I don't have the numbers in front of me but management has discussed over the last year or two. This is something all retailers need to do from time to time (or they die like Sears), but it's lumpy. IMO, D&A is a better proxy for long term capex needs for a retailer not pushing store growth, but for TGT depreciation is probably going to rise the next couple of years.

IMO it has nothing to do with AUM. He was investing in large caps even when small and his strategy scales well. I think it is just a period of underperformance for a concentrated value investor and he should be judged over the cycle. In the meantime, he needs to manage his LPs which won't be easy.

The Board's communication regarding the CEO's and CFO's departure was atrocious. No surprise they aren't getting deference from shareholders even if things look better now than 6 months ago.

They called out $33.5m expense at Ventures for investigation and remediation for a manufacturing product. This popped up earlier in 2018. Did they ever say what unit or product this relates to? I can't seem to find any further detail.

I'll add one observation from the ER: the relationships with their channel partners are early and they described Mitek as "co-selling." This obviously requires resources and increases selling costs for now, but as this matures they will get much more leverage from these relationships. Good for bottom line growth as they achieve scale.

It seems the greenmail option is off the table for awhile, that's good news. Obviously a more open sales process would be best for shareholders in getting the best price. Maybe Elliott realized they weren't going to win a proxy contest? Another possibility would be a take private by management and Elliott. Might end up at a higher price than current offer but probably would still undervalue the company. I agree stock should be higher today.

The backroom drama has been interesting. DeBello was fired but no one knew why, and the CFO leaving the same day was obviously concerning, then the offer comes in. The initial offer was a lowball IMO and I think ASG is trying to strong arm a deal due to the chaos. It's not going to happen because they overplayed their hand by coming in so aggressively. I think shareholders and the Board realize if this went to a bidding war the price would be higher than the original $10 or current $11.50. Mitek has a dominant franchise in mobile check deposit. Despite check usage declining, because mobile adoption is increasing, revenue here will probably grow in the double digits for some time. They're using this cash to invest in Mobile ID. Mobile ID is a much larger opportunity and has crossover with their financial industry expertise and customer base which is particularly important when you consider the regulatory hurdles. However, it is a much more competitive industry with lots of new entrants so Mitek is ramping spend on R&D, sales and acquisitions. Huge secular shifts in this direction make this a very attractive market and make Mitek an attractive target. My guess is the PE folks realize that companies that need digital ID verification are going to start buying up the tech companies and Mitek will be a top target. If Mitek can manage to fend off the economic buyers and get interest from the strategic buyers the price goes higher. I think the Board is well aware of this. In the meantime the business is growing rapidly and they have no problem funding growth.