Research from a short Part 2
Re: makemilns ....cash flow..cons
by: prooveittome (54/M/San Fran, CA) 11/25/00 3:26 pm
yahoo Msg: 41075 of 41130
IF this happens the longs win.
Cons of long and reasons for hedge funds to remain short.
1. For me it centers around cash flow, profitability and revenue growth. From my research they have never had two consecutive quarters with positive cash flow, positive earnings and revenue growth. This definately favors the shorts.
2. Zicam sales will increase, a definate. But they have not proven yet that sales equate to profitablity after cost of production, advertising, etc. Fourth quarter compared to same quarter last year of 0.13/share will give the real clue. Until then there is no reason to cover until this is proven fact.
3. Gumm sales of current products have never been a source for postive cash flow, earnings growth or revenue growth. Remain short because of this.
4. The longs talk about a dental contract that will make the gum side profitable. The SEC filing does say they are working with a 'consumer products company' and it could be out "very soon". On the otherhand, it also states in the 'risk statement' that there is a possibility that they will not be able to secure this contract. If they do get a contract, nothing can be assumed until actual numbers are revealed. Past gum business shows low profit margins. Who is to say a new contract can save them? Short or long, this favors niether until proven that its not a one quarter fling. The results have to show up in the earnings.
5. Joint Venture. Same reasoning as with dental. Atleast GUMM doesn't have to put any money into this. Swedish Match is responsible for all financing up front. Others have dug and found they may even own a lot of GUMM shares. However, my point is they have not proven anything with this business and product relationship. Its all proven in the future earnings statements and we don't have those yet.
6. Balance sheet. Shorts use past information of earnings statements to base their decisions and looking at all past earnings statemtents there are no consecutive quarters of postive cash flow, positive earnings, and earnings growth. There has also been no new products announced that would show this to change. And the announcement of new products don't mean anything because it all depends upon how these products eventually show up in the earning statements.
I have offered you the main reasons for a short position. The little slammers who frequent here every other post knocking the company are not worth anyone's time. What I have given above is worth a lot of shares that will some day be covered. The bet is at a lower price until proven otherwise by facts in earnings statements. |
