OSTK - Overstock.com

[spark411]

There is a fundamental need in the marketplace that Overstock is addressing.  The investor universe is not appreciating the importance of Overstock in the internet marketplace.    When an Amazon, Walmart, Macy's, etc. tries to sell a product, they can't price one good that is not moving well lower than the competing products that are moving well.    The only way the big guys can keep their margins is to remove the non-selling product to another site so that there are no pricing conflicts.    My family has been in the retail business a long time and price consistency within a store is very critical.  For us, we have to sell the remaining goods not moving at an outlet store or even flea markets.  It is amazing how much money we make moving to the outlet store and flea markets.    Overstock is the outlet store/flea market for the internet marketplace.    Moreover, they are making money off someone else's money i.e. Overstock gets paid before they pay the vendors.    This creates a float that they can invest.    The number of vendors they have and support keeps increasing.  The number of vendors/partners that Overstock is working with is their moat.    As long as the moat grows, this business will keep growing.

 

 

If you take a step back and look at the big picture, you have the following:

 

1.  A company with net debt of $100M+.  The company has no debt.

2.  The company makes pure profit.  There is very little the company has to invest with the exception of building it's website/technology.  They investment in the website/technology incrementally i.e. only if it produces a return.  There are no bet the farm type of investments needed for this business to grow.  Also, the company can increase their free cash flow at anytime just by lowering their investments i.e. there is very little maintenance capex needed.

3.  The marketplace NEEDs this company's service.

4.  The number of partners/vendors they are signing is very difficult and time consuming to replicate by competitors.  Big Moat

5.  A majority of their spending is on advertising i.e. building their brand.  The brand equity is not on their books but is growing each day.

6.  The P/E ratio on this stock is not accurate for three reasons.    A)  they used NOLs in Q4 that artificially lowered their P/E  B) they put technology costs in the expense line item instead of capitalizing which means the P/E is higher C) they have legal costs that they can shut down at their own peril.  A private buyer will not factor in the cost of legal costs.

7.  Overstocks is one of the most hated stocks in Wall Street because Overstock is suing Wall Street!  There are big hitters like SAC (Steve Cohen) and Goldman Sachs who are after Overstock.  It seems obvious to me that the stock is being manipulated and thus the volatility.    Pat Byrne and Fairfax does not care about the stock because they have control of the business.  Both of them can take advantage of the situation and buy back more stock.

 

The business has three risks:

 

1.  Overstock depends on Google to feed them leads/customers.  Overstock's lumpy revenue is a function of changes in Google's algorithms.  My biggest concern is changes in Google's algorithms and not Overstock's business itself.   

2.  The CEO, Pat Byrne and Fairfax takes this business private similar to Michael Dell.

3.  The stock manipulation continues to occur and I will not see the stock move up in the next 3 years.

 

I think this stock is a definite buy.  It's selling below it's intrinsic value and this stock is a compounding machine.

 

 

 

[DanielGMask]

New post by Sam Antar: http://feedproxy.google.com/~r/WhiteCollarFraud/~3/Y7aMaeBOOQw/indicted-former-utah-attorney-general.html

[LowIQinvestor]

Not your average earnings release...

 

http://finance.yahoo.com/news/overstock-com-reports-q2-2014-130000650.html

 

"In addition, the 1st Appellate District of the California Court of Appeals has set an August 15, 2014 date in San Francisco to hear oral arguments regarding our lawsuit against Goldman Sachs and Merrill Lynch, as well as the motion to unseal the evidence that has been jointly filed by The Economist, Rolling Stone, Bloomberg, and The New York Times. I believe things are going to get exciting."

 

"Your humble servant,

 

Patrick M. Byrne

 

P.S.  On June 5 of this quarter several CNBC personalities issued an on-air invitation/challenge to me to appear on CNBC. I publicly accepted that invitation that very day (see my DeepCapture blog, "My Response to Becky Quick's Proposal: I Do," June 5, 2014). Since then, CNBC has refused to respond to emails or phone calls. I mention this only because shareholders have asked me why I did not call their raise. The answer is, I did, and they were bluffing."

[rkbabang]

Not your average earnings release...

 

He's not your average CEO.

 

BTW:  I wanted to go to Porcfest this year to see Patrick Bryne in person (one of the many reasons), but I couldn't make it. :(

 

[Parsad]

The CNBC clip, including Jim Cramer refusing to comment at all on Overstock or Byrne:

 

http://www.deepcapture.com/my-response-to-becky-quicks-proposal-i-do/

 

Anybody remember that clip of Joe Kiernan, David Faber and Herb Greenberg mocking Overstock.com a few years ago with comments like "Isn't Overstock.com finished?"..."Is it still around?" 

 

Now they act as if they never said anything in past stories and interviews.  Cheers!

[peter1234]

He's not your average CEO.

 

This may be a slight understatement.

 

;D

[spark411]

i think it's interesting how Pat Byrne focused on the technology assets of Overstock.    I never considered the technology an asset that can be monetized by selling it to other firms.  Also, I did not foresee that the technology allows Overstock to roll out new ideas faster.  The technology advantage is just another reason that I think OSTK is a compounding machine.

[Eric50]

Good presentation with scenarios for upside potential

 

http://www.slideshare.net/mobile/StoneStreetAdvisors/ostk-public-presentation-w-updated-about-ssa-v-2015112?ref=http://www.valuewalk.com/2015/01/overstock-valuation-analysis/

[spark411]

OSTK's revenues continue to grow 15%+ but the stock is not moving.  Any thoughts?  Also, any thoughts on their efforts on crypto technology i.e. t0.com?

[MrB]

OSTK hoarding gold

http://www.ft.com/cms/s/0/d00fe302-8352-11e5-8095-ed1a37d1e096.html#axzz3qKKNTXgM

[Cevian]

What am I missing here? Shouldn't this company be able to achieve at least a 2% margin? (US$24mil?).

[Eric50]

http://www.globenewswire.com/news-release/2016/01/28/805775/0/en/Overstock-com-Accepts-20-Million-to-Settle-Market-Manipulation-Case.html

 

$20m settlement + market cap of $270m = $290m or +4%

[Liberty]

http://garyweiss.blogspot.ca/2016/12/canadian-court-wallops-overstockcom-ceo.html?m=1

[rkbabang]

http://garyweiss.blogspot.ca/2016/12/canadian-court-wallops-overstockcom-ceo.html?m=1

 

That is some really great unbiased reporting there.

 

Aly Nazerali is described as "a Candian stock promoter", while Deep Capture is a "website that retails fake news, conspiracy theories and personal attacks on journalist and whistleblowers".    And Mark Mitchell is a "right-wing conspiracy theorist" who "maliciously fabricated wild accusations".

 

And that is just how the article starts.  The same journalistic integrity is in abundance throughout the article.

 

[Liberty]

http://garyweiss.blogspot.ca/2016/12/canadian-court-wallops-overstockcom-ceo.html?m=1

 

That is some really great unbiased reporting there.

 

Aly Nazerali is described as "a Candian stock promoter", while Deep Capture is a "website that retails fake news, conspiracy theories and personal attacks on journalist and whistleblowers".    And Mark Mitchell is a "right-wing conspiracy theorist" who "maliciously fabricated wild accusations".

 

And that is just how the article starts.  The same journalistic integrity is in abundance throughout the article.

 

This is a blog, so I don't think it claims to write in AP-style. But I posted because the court document is embedded and you can read for yourself.

[KinAlberta]

Anyone following or monitoring the t0 blockchain tech subsidiary?

 

What percent ownership did Overstock retain?

[awindenberger]

Anyone following or monitoring the t0 blockchain tech subsidiary?

 

What percent ownership did Overstock retain?

 

My understanding is that Overstock owns 81% of t0.

 

I'm somewhat surprised the discussion has died out on OSTK here. I finally happened to start looking into Overstock and find it quite fascinating.

 

Given that their new office is finally completed now, it seems to me that the company is set to start throwing off more cash, and that the blockchain work they are doing is simply a bonus. Of course I guess many investors don't like side-projects like these.

 

I'm not done with my DD, but initial thought is that the company looks cheaply priced here.

[Haasje]

Wrote a counter argument to a bear case by DT a while back http://seekingalpha.com/article/4022209-overstock-oozing-value

 

Some good info there.

 

Meanwhile Byrne got his Chuck Yeager moment when Overstock launched a special share class on blockchain. Could be a really sweet way to buy stock by the way. I can't trade it because its U.S. persons only but can imagine it will have some illiquidity premium built in while its actually a more valuable security except for said liquidity.

 

 

[kab60]

So they're guiding around 75m OCF this year and around 100m next year with 25m maintenance capex? And they target 15% revenue growth? So if one believes management 75m FCF from retail on a 400m marketcap? Plus a blockchain-option, a HQ which they can do a sale-leaseback on for 80m presumeably and a CEO wishing to do a dutch tender post Q4 report? (All info from recent calls). This screams cheap. I'm trying to get up to speed, does management totally lack credibility?

[Haasje]

Lot of history on management.

 

Byrne was out last year due to hepatitis. He's kind of a libertarian guy.

 

Years ago he got angry about some short selling campaign in his stock and he went after GS and some other banks over it. Got paid after many many years, last year. Certainly not a CEO everyone likes:

 

https://www.youtube.com/results?search_query=patrick+byrne

 

In his view Wayfair is burning money on ads to grow revenue and he just refuses to burn money to grow revenue at a similar pace. 

 

 

 

 

[kab60]

Thanks. I understand he's not everyones cup of tea. Does the numbers I posted look right? And any input on his track record re delivering what he promises?

[awindenberger]

Wrote a counter argument to a bear case by DT a while back http://seekingalpha.com/article/4022209-overstock-oozing-value

 

Some good info there.

 

Meanwhile Byrne got his Chuck Yeager moment when Overstock launched a special share class on blockchain. Could be a really sweet way to buy stock by the way. I can't trade it because its U.S. persons only but can imagine it will have some illiquidity premium built in while its actually a more valuable security except for said liquidity.

 

I read that article, lots of good info that got me interested in looking more in depth.

 

I'm innately attracted to companies with unusual CEOs that have strong views, a record of success, and don't do things the standard Wall Street way (think John Malone, Harry Singleton, and Sardar Biglari currently).

 

Byrne clearly has a history of disappointing the Street, but I agree with most of the things he's done, and t0 does look like it could be big. Of course this likely has to go in the long term holdings portion of a portfolio, because who knows how quickly the value will be realized. I'm a fan, so hoping some of my shorter term plays work out as expected to give me some more capital for OSTK.

 

BTW, I've signed up for a t0 account. Once its processed I'll let you guys know what the trading looks like.

[Haasje]

I'm not sure how well they live up to the number guidance. It's been a weird few years since I've been following. There has been a summer where they got hit by a google algorithm update (that threw them off a bit) and another year where he's been out for most of the year. Fwiw they've been consistent in my time following about what they were working on and what areas they would expand and that actually happening.

 

For numbers I'd go by Enterprise Value. I think they also hold some Bitcoin and that's up a lot since I've last written about them and I don't know how much they were holding to begin with. 

 

 

 

 

 

[KinAlberta]

Mentions Overstock:

 

2017: The State Of Cryptocurrencies (Part 1)

Javier Hasse , Benzinga Staff Writer     

January 23, 2017

https://www.benzinga.com/fintech/17/01/8934340/2017-the-state-of-cryptocurrencies-part-1

[spark411]

Overstock on fire!  Run baby run!  Finally market value is catching up to intrinsic value.  Byrne says will take private by end of year if the stock does not move up.    Also, OSTK looking to separate blockchain investments with main business.  Simplicity in the story should attract investors.  Goal is to make investors compare Wayfair with OSTK.  Look at market cap to sales.  Ridiculous...