Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Sean Collett who wrote (73820)	10/2/2023 10:53:36 PM
From: E_K_S	1 Recommendation Recommended By Sean Collett Respond to of 78458

Good analysis. FCF positive is important but large debt can be an anchor around the company's neck. No position but I have seen similar value opportunities and have always focused on the FCF but made sure it is growing especially if they are slowly paying down debt. For me, I just do not like the sector (unless I can buy at reasonable PE's). I have been building positions in two retailers new to me; LEVI & KTB. I like their move to the DTC model and PE's are in my value zone. LEVI has low debt w/ Debt/Equity at 0.57x vs KTB at 2.7x. As always, positions are small. FWIW made a small add today to KTB. Still looking for KTB to break below $40 so I can double up on the position. LEVI still trying to get back to FCF positive w/ 3 quarters in the negative but past 4 years positive FCF. I will give them a pass as they move to DTC (they had some inventory issues last 2 quarters). Analysts see growing earrings through 2024.

To: Sean Collett who wrote (73820)	10/3/2023 5:40:48 AM
From: Harshu Vyas	Read Replies (1) \| Respond to of 78458

(I'm playing the devil's advocate here. I don't know the full reason for the sheer selling volume but I'll hazard a guess.) Difference now between pre-pandemic and now is the large decline in assets. 2019: $17.3b in assets vs $5b in equity w/ $4.9b in surplus -> a healthy company regardless of the debt. 2023 Q2: $11.8b in assets vs $0.7b in equity with $0.5b in surplus -> heavily leveraged and deemed insolvent, It's true that most of their assets have been intangible - 56% in 2019 and 52% today - but I don't think the market cares. Those intangible assets, in 2019, had the potential to be sold. Now QRTEA have a core business and its hard to sell off more assets. (Maybe they also sold Zulily at too low of a price...) Since QRTEA have nothing left to offer in terms of a "fire sale" maybe the market's looking at that largely intangible balance sheet and questioning the value of those assets. If QRTEA goes bankrupt, shareholders probably get nothing and maybe players in the market think this proposition is too risky. I agree with you about buying back debt. But management haven't been nearly as solid as I expected 8 months ago. They've been largely docile. Agreed completely regarding bankruptcy. I think the market agrees, too. Maybe they won't secure refinancing. It's possible the market "knows" something. Here's their principal payments schedule: 2024: $423m 2025: $586m 2026: $1430m 2027: $575m 2028: $500m It looks pretty mean! Roughly $700m/yr for the next 5y. I don't think FCF alone can "do it" but with $1.36b in w/c and some luck with refinancing, it's definitely possible. All of that said, I'm looking to re-enter at some point. For now, watching from the side-lines suits me fine! Best, Harshu Vyas