OSTK - Overstock.com

[valuecfa]

Just listened to the call...i see Sanjeev was mentioned by Patrick.

 

I agree it is time for Patrick to step down and let someone with more vision/experience in website and retail development to take this company to the next level (consistent profitability).

[Guest Hester]

If the Chou funds' total cost for OSTK was $45 922 320 in June 30, 2011 then Francis has increased his holdings by 19.1%.

 

According to Insider Monkey, Francis Chou has been buying Overstock for a total of $8 772 384.70 starting July 2011:

http://www.insidermonkey.com/insider-trading/company/overstockcom+inc/1130713/purchases/

 

Who do you think is correct, Sam E. Antar and the media in general, or Francis Chou and Patrick Byrne?

 

how could Patrick Byrne be "correct" when over the last five years he has been CEO the stock has gone from $17 to $5.

 

Antar started blogging about Overstock in very early 2007, check his blog. At the very end of 2006, Overstock was Francis Chou's biggest equity position. http://seekingalpha.com/article/33224-francis-chou-s-biggest-bet-overstock-com

 

So they've both been voicing their opinion concurrently (in much different ways obviously) about Overstock for over five years now. Needless to say, one has been very correct and the other very incorrect so far. http://finance.yahoo.com/echarts?s=OSTK+Interactive#symbol=ostk;range=20070105,20120306;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

 

But then again, it doesn't matter what Chou or Antar think about Overstock. What only matters are the facts, not lame appeals to authority.

[Parsad]

Are you two actually arguing with each other because you agree on the same thing?  ;D  What's the matter with you both! 

 

By the way, if any of you are still shorting Overstock, I think it may be a big mistake.  Cheers!

[MrB]

Looking at Francis Chou's holdings it's clear that he's very confident in Overstock's future. FYI, I'm including the Chou funds' investment strategy:

The investment process followed in selecting equity investments for the Funds is a value-oriented approach to investing. This involves a detailed analysis of the strengths of individual companies, with much less emphasis on short-term market factors. Far greater importance is placed upon an assessment of a company's balance sheet, cash flow characteristics, profitability, industry position, special strengths, future growth potential and management ability

 

The level of investments in the company’s securities is generally commensurate with the current price of the company’s securities in relation to its intrinsic value as determined by the above factors.

 

Here's what I found when looking at the semi-annual report from 2011, correct me if I'm wrong:

 

CHOU ASSOCIATES FUND - JUNE 30, 2011

 

Overstock was 7.8% of total cost, which is about the same size as BRK.A, AbitibiBowater Inc and BAC-WTA.

 

Overstock.com Inc.

Shares: 1,504,209     

Cost: $ 31,016,174 

Value: $ 22,077,843

 

PORTFOLIO TOTAL:

Cost: $ 397,437,904

Value: $ 403,318,649

 

CHOU RRSP FUND - JUNE 30, 2011

Overstock was 12.5% of total cost, which 4 times more than BRK.A.

 

Overstock.com Inc.

Shares: 715,500

Cost: $ 14,906,146     

Value: $ 10,501,66

 

PORTFOLIO TOTAL:

Cost: $  119,483,556

Value: $  122,005,47

 

Other interesting findings:

JUNE 30, 2008:

The Chou Associates and RRSP funds had $ 788 800 (410 384+378,416) in Jan 2009 call options with a strike price between $ 40.00-45.00. I'm not sure what to make out of this, but I guess Chou thought OSTK could be at $40-45 in Jan, 2009.

 

JUNE 30, 2010:

the Chou Bond fund had 5% in "Overstock.com Inc., 3.75%". 3.75% seems pretty low…

 

References:

http://www.choufunds.com/index.html

http://www.choufunds.com/pdf/SemiAR11.pdf

http://www.choufunds.com/pdf/SA10%20pdf.pdf

http://www.choufunds.com/pdf/SA08.pdf

 

By the way, Torstar Corporation is almost 23% of the RRSP fund's total costs. Torstar is something I have to look into:

http://tmx.quotemedia.com/financials.php?qm_symbol=TS.B

 

 

When it comes to Chou's investment in Overstock readers here should consider the following.

The USDCAD moved as much as 26% from 2009-2011 which distorts CAD reported numbers in a meaningful way. 

The bonds traded down to the low 60's (might even been into the mid fifties) in USD and with someone like Chou I would assume he bought closer to the lows than the highs. These bonds were called at par according to an earlier post. Yet in CAD the returns could look up to 26% weaker.

 

This is a heavily shorted stock and these guys have to borrow from somewhere and I think it was mentioned on this board that the OSTK rates ranges/ed from 25%-30%. When lending out your stock you get paid that rate on market value, so if you bought say at $15 and the stock increases to $20 you can earn up to 40% on your stock.

 

Covered calls?? OSTK stock offered some great covered call returns.

 

I think the probability is high that Chou would have captured some of that value; let me rephrase that...a lot of that value.

 

Lastly, if you were borrowing at those rates then you would be squealing too and I certainly hear a lot of squealing. However, with all the noise on this board it is hard to know who exactly it is I'm hearing.

 

[Guest ValueCarl]

Sam Antar's evil twin, Gary Weiss, steps up to the plate in order to Whack a Mole! So the beat goes on.........

 

http://seekingalpha.com/article/416791-the-case-of-the-200-missing-overstock-com-employees

[Guest ValueCarl]

SI data is somewhat of a lagging indicator, but one must presume that even if March 1st shows a decrease to the current eye popping numbers representative of the "buy ins" which took place on the day before the earnings report which was March 1st--probably not by coincidence--they would have been shorting more since the day of the report, March 2nd, leading up to now.

 

As of 2/15/12, with more than 12 percent of the outstanding shares shorted and 23 days of "avg. share volume" to cover, never mind the more narrow "share float" much higher percentage being shorted, while contemplating a real time increase as I write, you can imagine the KABOOM moment that is coming fast at these MOLES.

 

http://www.nasdaq.com/symbol/ostk/short-interest

 

What's funny for me, is they must be point guarding for Amazon because besides attempting to disparage and kill a positive free cash flow enterprise with virtually NO DEBT, why wouldn't Amazon be a buyer of one of their competitors at this ridiculous price?   

 

 

[Guest Hester]

Peter Burke, my reply was directed at "Hellsten."

[Guest Hester]

 

When it comes to Chou's investment in Overstock readers here should consider the following.

The USDCAD moved as much as 26% from 2009-2011 which distorts CAD reported numbers in a meaningful way. 

The bonds traded down to the low 60's (might even been into the mid fifties) in USD and with someone like Chou I would assume he bought closer to the lows than the highs. These bonds were called at par according to an earlier post. Yet in CAD the returns could look up to 26% weaker.

 

This is a heavily shorted stock and these guys have to borrow from somewhere and I think it was mentioned on this board that the OSTK rates ranges/ed from 25%-30%. When lending out your stock you get paid that rate on market value, so if you bought say at $15 and the stock increases to $20 you can earn up to 40% on your stock.

 

Covered calls?? OSTK stock offered some great covered call returns.

 

I think the probability is high that Chou would have captured some of that value; let me rephrase that...a lot of that value.

 

Lastly, if you were borrowing at those rates then you would be squealing too and I certainly hear a lot of squealing. However, with all the noise on this board it is hard to know who exactly it is I'm hearing.

 

You have very bad data. As of right now, Interactive Brokers has the HTB fee on OSTK at a little over 1% annually. So I don't know where you're coming up with 25-30%. Maybe that was true during the height of the Sith Lord frenzy in the middle of the last decade, but now, one can borrow Overstock almost for free.

 

I highly doubt Chou was able to really profit much off of the shorting fees. First of all, like I said the fees have been low for a while. Second, taking advantage of the high short interest would mean he would have to be approached by a short seller or (more likely) his broker, and choose to lend out his shares to the evil miscreants on the other side. Likely those asking for inventory would be the same people being sued by Overstock  ;D. Highly Unlikely Chou profited much my view.

[Guest ValueCarl]

Under normal situations where enterprises are aligning their costs, especially labor, with the business market conditions taking place, Wall Street cheers jubilantly over such news.

 

Not these "serial killers" they have hired to destroy value and rob from society, however. I have once suggested that Wall Street and their minion should be required to adhere to some form of the medical field's "Hippocratic Oath" but that's not something these degenerate criminals would allow to happen, just as it's not "legal" to insure or guarantee profits when they lose other peoples money, and garner fees for winning, losing or going nowhere. What other business under the stars can GARNER income and fees for destroying value with no accountability during the process? This is an institution that needs to be GUTTED! 

 

It seems odd, quite bizarre actually, that Weiss' blog does not allow comments or I would rip him a new one, not that the criminals he works with care, however.  >:(         

[MrB]

You have very bad data. As of right now, Interactive Brokers has the HTB fee on OSTK at a little over 1% annually. So I don't know where you're coming up with 25-30%. Maybe that was true during the height of the Sith Lord frenzy in the middle of the last decade, but now, one can borrow Overstock almost for free.

 

I highly doubt Chou was able to really profit much off of the shorting fees. First of all, like I said the fees have been low for a while. Second, taking advantage of the high short interest would mean he would have to be approached by a short seller or (more likely) his broker, and choose to lend out his shares to the evil miscreants on the other side. Likely those asking for inventory would be the same people being sued by Overstock  ;D. Highly Unlikely Chou profited much my view.

 

Agh, my mistake. Chou is the kind of guy that misses the 30% and hits the 1%. LOL By the way. I think these days Chou gets the calls rather than make them. 

 

a great defense of a lousy stock pick.

 

The point is that the cost/return data might be off. Defense ???

 

[Parsad]

You've only got about 30% float on the outstanding shares and over 35% of that is shorted.  In other words, on any positive news or a share buyback, the shorts are going to get the shit squeezed out of them.  When the shorts were targeting Fairfax, you had about 55% float and about 20% of that was shorted at the peak. 

 

If Byrne cuts legal by $10-12M, cuts across the board payroll and other expenses to get the $8.5M he quoted in the presentation, and if revenues get back over $1.1B, they should be able to earn about $18-20M after tax (since they will barely pay any tax for the next 5-7 years).  That's about 6 times earnings, for a business that should be able to grow at 10-15% a year.  Cheers!

[tombgrt]

$5.15

 

Guess I have some new work to do!

[Guest ValueCarl]

Like BAC, knowing the fear induced from things including delisting notices as well as institutional sales that THE CABAL is spearheading, MENS' CONVICTIONS will be TESTED at that $5 LINE of DEMARCATION.

 

Sanjeev, get the TRUCKS ready!       

[Guest ValueCarl]

A MAN without CONVICTION, is no MAN at all.

 

Call Sam, and tell him I AM, a MAN with CONVICTION and not a "CONVICTED FELON."

 

While you're at it, call the authorities and demand that they watch the "back office" trading of this stock which will continue to be exposed to every DIRTY TRICK, legal and illegal, in or outside the book already created, or the one soon to be created so they might have their way.  >:( 

[Guest Hester]

You've only got about 30% float on the outstanding shares and over 35% of that is shorted.  In other words, on any positive news or a share buyback, the shorts are going to get the shit squeezed out of them.  When the shorts were targeting Fairfax, you had about 55% float and about 20% of that was shorted at the peak. 

 

If Byrne cuts legal by $10-12M, cuts across the board payroll and other expenses to get the $8.5M he quoted in the presentation, and if revenues get back over $1.1B, they should be able to earn about $18-20M after tax (since they will barely pay any tax for the next 5-7 years).  That's about 6 times earnings, for a business that should be able to grow at 10-15% a year.  Cheers!

 

I'm sure there will be at least a little short squeeze at some point in the next few years, as there has been in the past (followed by violent falls), but this company has had pretty much a permanent high short interest since the crazy Sith Lord Conference Call. Overstock shares are very liquid given the company's current market cap. Like I said, the cost to borrow is basically one percent. In the massive short squeezes you see, like SHLD this year for example, the cost to borrow is usually at least 20%. I think Sears was like 40 or 50 percent (don't quote me on that though).

 

People have been saying this business should be able to grow at 10-15% a year for a very long time. I was reading old articles on OSTK this weekend just for fun, and almost everybody had modeled OSTK's revenue over $1.5 billion by the end of last decade. The VIC writeup in March 2006 had a "conservative" growth scenario of $1.7 billion in revenue by 2009 and an "optimistic" scenario of $2.2 billion.

 

The problem is Patrick Byrne. If he got lost, or moved to China and started a new company and did an RTO or something, I would probably invest in Overstock at these levels. In fact, I would bet money that they would be a $500 million market cap within 5 years. But until the CEO stops spending so much time using Overstock as his personal jumping board for his eccentric conspiracies, Overstock will never consistently grow anywhere near 10-15% and will be a terminal short.

 

disclosure: no positions

[Parsad]

People have been saying this business should be able to grow at 10-15% a year for a very long time. I was reading old articles on OSTK this weekend just for fun, and almost everybody had modeled OSTK's revenue over $1.5 billion by the end of last decade. The VIC writeup in March 2006 had a "conservative" growth scenario of $1.7 billion in revenue by 2009 and an "optimistic" scenario of $2.2 billion.

 

Effectively it has:

 

- Growth in revenues 2002-2012 = 27% annualized

 

But the last five years of growth has been one good year after one really bad year, over and over. 

 

And I agree with you, that cost has been a result of Byrne's distractions from the lawsuit and Deepcapture.com.  There is absolutely no reason why a $300M market cap company had to spend $16M on litigation last year!  Or why a small percent of Overstock's revenues were being spent to support Deepcapture.  It's not his little piggy bank! 

 

At some point, and hopefully it's before they run into a truly stagnant period like Sears, Byrne refocuses the business and resumes his 15% a year trajectory.  If and when that day comes, and I'm definitely betting on it, the shorts are in big trouble!  Cheers!

[Guest ValueCarl]

We are back to these legal expenditures as being a bad thing for new comers applying their capital into the security! I heard Dr. Byrne as well as Mr. Johnson say that the monies were well spent minimally, because of the focus which came about at the President's desk in The Oval Office with reference to international terrorism being applied "INSIDE" of our U.S. Financial Markets, with specific reference to "illegal naked short selling." 

 

Now, I also heard them say, if this did NOT become a FOCUS of ATTENTION, the stock symbol known as OSTK, might be VAPORWARE today.

 

Note to authorities: Get a handle on the trading taking place in this stock according to all back office operations, FORTHWITH!  >:( 

[Parsad]

We are back to these legal expenditures as being a bad thing for new comers applying their capital into the security! I heard Dr. Byrne as well as Mr. Johnson say that the monies were well spent minimally, because of the focus which came about at the President's desk in The Oval Office with reference to international terrorism being applied "INSIDE" of our U.S. Financial Markets, with specific reference to "illegal naked short selling." 

 

Now, I also heard them say, if this did NOT become a FOCUS of ATTENTION, the stock symbol known as OSTK, might be VAPORWARE today.

 

Note to authorities: Get a handle on the trading taking place in this stock according to all back office operations, FORTHWITH!  >:(

 

They didn't need $16M to do it.  They already had the attention two years ago, and they didn't spend anywhere near $16M.  If they won this case, it would have been huge.  But it has been dismissed so far and we'll have to see exactly what happens upon appeal. 

 

So the "win big, lose little" moto is at work...unfortunately, $16M for a $300M market-cap company, with $30M equity and barely profitable, was more like win big, lose big! 

 

Let me ask you...whose reputation right now would be ranked the highest...Prem Watsa, Steve Cohen, Jim Chanos, Daniel Loeb, Morgan Keegan, or Adam Sender?  The answer is obviously Prem Watsa!  Prem focused on the business and fought the lawsuit second...and the cost was not exorbitant for a company with $8B in equity.  Cheers!

[Guest ValueCarl]

Sanjeev, I am not sure you are being fair with this analogy of Fairfax and Prem specifically, but I will defer to your judgment because you know Fairfax like the back of your hand while you are at home sleeping in your bed, after you tell me this.

 

What was Fairfax's market cap when they began their legal defense?       

[alertmeipp]

http://seekingalpha.com/article/416791-the-case-of-the-200-missing-overstock-com-employees

 

 

This company is a goner. Sales are down, losses are mounting, its inept management is running out of steam, the stock price is tanking and investors are fleeing. Bankruptcy is a real possibility. What more is there to say?

 

If and when Overstock shares dip below $5, it officially becomes a penny stock. Stocks trading so low must be automatically ejected from many institutional portfolios, and they are no longer marginable, so they will be avoided by the many investors who like to buy stocks on margin.

 

 

[alertmeipp]

http://seekingalpha.com/article/416791-the-case-of-the-200-missing-overstock-com-employees

 

 

This company is a goner. Sales are down, losses are mounting, its inept management is running out of steam, the stock price is tanking and investors are fleeing. Bankruptcy is a real possibility. What more is there to say?

 

If and when Overstock shares dip below $5, it officially becomes a penny stock. Stocks trading so low must be automatically ejected from many institutional portfolios, and they are no longer marginable, so they will be avoided by the many investors who like to buy stocks on margin.

 

I don't see how OSTK can go BK anytime soon.

 

http://en.wikipedia.org/wiki/Penny_stock

 

 

I have seen better bash work.

[Parsad]

Sanjeev, I am not sure you are being fair with this analogy of Fairfax and Prem specifically, but I will defer to your judgment because you know Fairfax like the back of your hand while you are at home sleeping in your bed, after you tell me this.

 

What was Fairfax's market cap when they began their legal defense?     

 

Don't worry about market capitalization...worry about equity, because that is actually what they have to spend.  Fairfax's equity was $2.2B...so if they spent even $50M a year, they could afford it...and their equity today is $8B!  Overstock's equity was about $14M and bounced up to $30M at the beginning of 2011.  They could not afford to spend $16M on legal costs.  That's why they have a $17M working capital deficit right now.

 

I don't see how OSTK can go BK anytime soon.

 

It's not going bankrupt anytime soon.  They have $95M in cash and they will generate about $30M-$40M in free cash flow this year if they cut payroll and legal as they have said they will do, and their traffic goes back up to levels before the 2011 google penalty.  Traffic has rebounded quite a bit, and I think they will be fine.  But they have to stick to cutting costs and marketing their retail business.  Cheers! 

[stahleyp]

what is this about?

 

"Overstock.com CEO Patrick Byrne had better timing than Francis Chou. Back on May 20 to May 24, 2010, Byrne's 100% controlled High Plains Investments LLC dumped 140,000 common shares at an average price of $22.11 per share and collected over $3 million in proceeds. "

[alertmeipp]

I haven't been followed OSTK for quite sometime. Current valuation makes me want to jump in. This thing is cheap, 1 billions revenue, with market cap of 120m. A 3% margin is 30m and easily a triple.

 

I listened to the call.  Seriously, what is that Patrick guy doing? Seems unprepared to me. But I can tell he will doing everything to make the short squeezed.

 

If somehow, they can raised 100million debt to buy back. I think we will see a SHLD-type run.

 

Near-term catalysts:

- Debt and buy-back.

- A respectful marketing executive.

- A management shake-up or sign that Patrick is becoming more OSTK-focused.

 

The above have good chance of happening, the smart shorts will cover soon.

 

A few questions:

 

The payable jump quite a bit, it is a seasonal thing? What's the google penalty ppl are talking about?

 

They have quite a bit of cash on hand, how much is un-restricted? Can they use cash-on-hand to buyback?

[Guest ValueCarl]

How is Dr. Byrne's father doing? I don't see him on the seven person board--just six--and I haven't located a PR where he left since re-arriving in 2010.

 

http://investors.overstock.com/phoenix.zhtml?c=131091&p=irol-newsArticle&ID=1560370&highlight=

 

http://www.overstock.com/leadership

 

What is not stated here for some odd reason,  is that Warren E. Buffett's involvement with Geico was triggered, initially, by Ben Graham's own darling position established in the 1940's as a core holding in his Investment Partnership before being taken to the stock market wood shed due to poor underwriting in the 70's. I am certain Buffett was involved with Geico before Jack Byrne was hired to spearhead the turnaround, and unfortunately, Graham who died in 1975, never lived to see the magic which included Buffett swallowing the whole enchilada as part of the Berkshire Empire today. It seems to me, this Wiki history should be updated by intimate parties with the will to do so.

 

Who are these PEOPLE attacking this stock again?       

 

http://en.wikipedia.org/wiki/John_J._Byrne

 

Insurance industry magnate

 

After being passed over for president in 1975, Byrne quit to become chief executive of GEICO, then a troubled Washington, D.C. auto insurer. GEICO sold insurance directly to low-risk drivers, but had begun to lose money after underwriting riskier drivers. The company's shares had declined and regulators wanted to shut it down.[3]

Byrne fired more than 1,500 employees, reducing the staff to fewer than 6,400, and closed 23 sales offices. It also stopped writing policies in several states. [4]

GEICO had a turnaround as a result of these measures, which attracted the attention of investor Warren Buffett. He bought a position in the company and eventually his Berkshire Hathaway acquired the company. He has called Byrne the "Babe Ruth of insurance."[3]

In 1985, Byrne was invited to run the troubled Fireman's Fund, then a subsidiary of American Express. Fireman's had incurred $356 million in pretax losses in 1983 and 1984. Byrne vastly improved Fireman's financial performance and initiated a public offering of some of Fireman's shares in 1985. The company was sold to Allianz AG in 1991.[3] Byrne retained the Fireman's holding company, which he later renamed as White Mountains Insurance Group. [3][5]

 

http://finance.yahoo.com/news/White-Mountains-Repurchases-prnews-498668432.html

 

 

HAMILTON, Bermuda, Feb. 23, 2012 /PRNewswire/ -- White Mountains Insurance Group, Ltd. (NYSE: WTM - News) announced today that it has repurchased for cash all 89,729 White Mountains common shares beneficially owned by Berkshire Hathaway Inc. at a purchase price of $500 per share.  The Company has 30,668 shares remaining under its share repurchase authorization.

 

http://www.enn.com/top_stories/article/32578

 

Berkshire, an insurance and investment company, initially agreed to invest $300 million in White Mountains in 2001, when the latter paid about $2.2 billion for the U.S. property and casualty operations of Britain's CGNU Group.

Buffett had been a long-time friend of Jack Byrne, who was White Mountains' chief executive at the time. Byrne is credited with improving the fortunes of auto insurer Geico Corp in the 1970s, with Buffett as an investor. Berkshire now owns Geico.