If your concern is tone, then we have no dispute. I'd appreciate your reading what I've stated on that note so there is no misunderstanding. Message 8351276
The fact is the following statement isn't wholly supported without fail. "Paul has consistently provided us with his thoughts in a lucid, interesting and courteous way."
The point about courteousness hasn't been the universal experience of everyone who I have seen post here. Message 8337615
Message 8352798
More importantly, clarity, lucidity, and accuracy isn't apparent in some recent expressions. "Perhaps this is because the market values FLEX more than CLS, as Paul has been suggesting." There is nothing suggestive about what he expressed regarding the relative values of FLEX and CLS.
To be completely clear, using your numbers, what he explicitly stated was to short the company with the substantially lower price to sales, CLS, in a paired trade with FLEX. He fails to explain why such a trade would be prudent.
There is absolutely nothing lucid about his explanation for the position. In fact, if you care to look closely you will find it is verifiably erroneous.
First it is internally inconsistent. Consider that his standard for fair value for CLS relative to FLEX occurs when FLEX has a 30-50% premium to CLS. Given a forward P:S of .6 (using your number) and applying his definition, FLEX would be fairly valued with a P:S of .78 to .9 (presumably because at least in part it has higher margins, though he doesn't fully state a defensible reason for quantifying a "30-50% premium).
To be clear, using his standard, FLEX is undervalued relative to CLS when its P:S is below .78-.90. By definition, it is overvalued relative to CLS when its P:S is above the range.
Your number, 1.23, places FLEX above the range. What is inconsistent? Well, on the one hand, FLEX is overvalued relative to CLS according to the application of his assumption. On the other hand he is advocating a short of CLS.
Look, this should not be a big deal. Open opinions are good. Open acceptance of diverse opinions is necessary. Courtesy is good. Threats or hostility, however subtle (or blunt) are not good. To wit - "Far more than yours will if you keep the same tone as your past few posts." Well Sam, I'm happy to turn the other cheek on that statement. This is not about popularity contests.
No one should consider themselves an infallible authority on security analysis. I certainly do not. Honest challenges of opinion are good. We can all stand to learn and know more. This has nothing to with castigating Klemencic because he was wrong. Its more to point out that no one is infallible here nor should anyone act as if they were.
Regarding relative market valuation of FLEX and CLS, there are many different criteria that combine in this sector to yield the valuations the market spits out. Clearly, the market is valuing CLS differently than some here have argued. In point, I will say that CLS has taken steps to separate itself from SCI, if such a comparison ever were fully accurate. It also clearly is winning more business than what others simply don't want. "Celestica seems to be good at acquiring a mishmash of businesses the others don't want." In point, they are winning higher margin telecom business among others. At the same time, its improving margins reflect changing product mix.
In fact, it is just these points that may go a long way in explaining what appears to be confounding Klemencic since he argued the point(after all CLS has moved decisively to reduce a premium with FLEX from the time he argued fair value for CLS relative to FLEX was 28-30 vs. 42) and why the position stated in the 3/16 post has proven to be grossly off the mark.
In the end, this and other threads should be about healthy debate. I welcome your substantive comments about FLEX and CLS. |
