Ahnuld, thanks a lot for your insight on OUTR. I've done my own research and taken a sizable position(more than 20% of my portfolio) in OUTR. If it wasn't for this thread, I probably would have never been aware of the opportunity.

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Anyone that is interested, here's an article about movie rental business

https://www.npd.com/wps/portal/npd/u...movie-rentals/

What I found most surprising, and the reason I became very bullish on this stock, is that Redbox still has a lot of room to eat market-share from Brick & Mortar, and Subscription(BD/DVD).

it comes down to the restrictive covenants on the debt, such as restrictions on dividends when outr trips out certain ratios (or not). go read through them on edgar and let me know what you think after that.

Redbox can lose 50% of revenue before breaking even. Also capex is lower because machines last much longer then 3-5 years.

So without expansion capex the maturing business could do close to 300m in it's current state.

And they are now testing price increase, so that could be 350 million soon if rental/machine does not go up much.

Also everyone ignores coinstar for some reason, that business has a wide moat as long as cash is around because of it's scale. Walmart could not take this inhouse because they do not have scale, and it would be too much headache. The short argument was that banks would take them out of business, but now they are installed in banks. I think coinstar produces like 70m a year in FCF and is steadily growing. So this provides a bottom.

And their used phone venture has a high return on capital if it takes off. Could add another 100-200m in FCF.

So in the super bull case you buy a company that could potentially do over 400m in FCF a few years out. Add in buybacks and it could be a home run.

Also bluray sales are still growing this year even. And they are higher margin. As long as people have crap internet and as long as movie studio's keep control of the release cycle of movies, red box could be around 10-15 years from now. They basicly fill a niche that streaming cannot fill because they are the only one that get to rent out new releases within a month after being released on DVD/Bluray, without being squeezed by studio's, because they can buy discs on open market and rent them out. They basicly have leverage over the studio's when they want to negotiate to buy discs in bulk from them.

Playing this one with the 2016 options. They were really cheap a month ago. Buybacks + cheapness + cash cow + 1.5 year options is a pretty good combo.

Read through the debt in the latest 10q/10k, what is the form number for the indentures? (Google results were T-1, but I was unable to find any T-1 filings for OUTR)

CFN being taken out for 11.25 plus a special dividend. I recommended it 4 weeks ago at 8.38. quick win, but its a cheap price for santandar

Nice call congrats

Do you own all of the stocks in the OP?

Got in a week ago for $6.93 so this is a nice surprise. Great job, ahnuld.

Great thread, thanks

well yeah

Still like all of the US-listed stocks here?

Anyone thinks AYA is a good stock ?

probably more so than at the time of the OP

Great thanks (bought them all at time of OP)!

which two off of that list do you like the most?

any thoughts on why outerwall was up 4% today? seemed like a random move

I mean I like them all in different ways (awwwwww). no but seriously, they have different risk profiles. tmus has basically no downside. post has incredible upside 5 years out. outr should be a double in 12 months. bks should be about 30 in 6 months when they complete the spinout. ttwo also has very little downside. hos has some downside protection now that its trading less than book but could also be about 75$ in 2 years. yet its in one of the industries I understand the least compared to the others.

so its hard to say whats the best. it depends on your goals, and to be honest together they make a nice core of a portfolio for the next year.

nothing that I was aware of. its heavily shorted so it has big moves in either direction. Q3 and Q4 will probably appear weak for outerwall as well, but the movie slate for 2015 and 2016 is massive/will break records. people are underestimating how much of an impact that has on outerwalls business both good and bad (this year).

Can you explain POST a bit more? I'll admit I'm a noob at reading financial statements, but it seems like it's not making much (if any?) money and have tons of debt. I've only heard of the PowerBar product of all the products they acquired. However, I can't imagine their PowerBar purchase was a good one. They bought it from Nestle who seemingly has unlimited capital and probably doesn't make many bad deals. I'm assuming they way overpaid for it or Nestle is predicting PowerBar won't be worth much in the future. Either way, I'd be surprised if they could add more value to PowerBar than Nestle could. I'll admit the Golden Boy Foods (peanut butter) company acquisition seems pretty smart. Having incredible upside 5 years out seems a bit nebulous. I'd be curious if you could put some estimates on the potential upside. Seems like there's still some reasonable downsize risk, as this company seems very leveraged, shrinking earnings, and declining margins on their cereal business relative to the other players.

you cant look at the historical financial statements to analyze post. the company has done so many acquisitions in the past 12 months that it would be useless. Instead you have to look at what kind of cashflows the business will be throwing off once all the different businesses get integrated. and then we need to look at the growth rates of the new verticals they are in.

if you piece together all of managements guidance on the deals, you get to a business that should be doing 630mm in ebitda when integrated and with the 15mm in syngergies from redoing a california plant (unrelated to the deals). with this info, and managements commentary on capex going forward, we can get to free cash (we can know with certainty what interest expense and tax rates are going to be). My spreadsheets are back at the office, but you get to something like 8.5x cashflow to equity at current prices. thats a fair price for a stable business but not exception (although tbh most stocks are trading for 12-13x cashflow these days). the heavy debt load kind of jucies the fcf to equity number so is a bit of a knock but can act to our benefit as well.

Now we need to see how realistic that 630mm ebitda goal for fiscal 2015 is. we really dont have much data on the latest deals, but annualizing the ebitda from fiscal Q3 (june end) and the 4 months of Michaels foods ebitda we can get pretty close to that number. We need to throw in the 16mm they just acquired and the 14mm synergies from that plant, but right now I get to 600mm. You also need to understand that with some many deals going on, Q3 wasnt reflective of each division operating at perfect efficiency. they have been some hiccups which happens during every transition. Given that im pretty confident this management team can get to the 630mm just by running things better.

Now the other side is growth. Ready to eat cereals are declining as a category yes. but theres 2 things. the first is post has gained some market share in the past year. yes margins were a bit down, but year over year ebitda was essentially unchanged. So its not a collapsing business. The second is post has reduced RTE cereals from effectively 100% of the business to about 35-40%. This is from all the deal activity. The rest of the business is in different verticals but they are all growing between 5-15%. all of a sudden this is a growth company.

This takes us to debt. In a declining ebitda business a high debt load is a big problem. its sort of a race against time. all the free cash needs to lower debt for equity to maintain its valuation as the 8x multiple (or whatever) is working off a lower and lower base. In a gorwing business, all the growth goes to equity. for example, if we say this business ix 8x ebitda off 630 with 2.5 billion debt, equity is worth 2540. now grow ebitda 8% a year for 5 years, while ebitda is about 50% higher, the equity value has doubled. so if management manages to grow in the high single digits the equity valuation has some major torque to it. But can they?

I dont want to go too much into Bill Stiritz' history, but the man is a retail legend (see the book The Outsiders for the story, which is a must read anyways). Over a period of about 20 years he opportunistically used debt to fund large acquisitions and at times sold off businesses or bought back tons of stock. Hes an amazing allocator of capital amongst his different brands and has a great sense of the capital markets. He basically came out of retirement because he was bored and brought his COO with him. If you have to bet on anyone doing something with these different brands and retail businesses this is the guy.

so yeah, looking at historical results you'd miss most of the above. gotta look forward and trust in great management.

can you talk more about why you like an offshore services company? seems like lots of capacity in rigs is coming online in the gulf. Are you counting on additional pemex demand? Why do you think book is a good indication of downside protection if business turns south? it's fair to say i'm skeptical of most analysis done by people outside the industry, but i don't mean so in a rude way -- most of your analysis is quite good.

also, can you piece together how you're valuing the parts of BKS?

ok, back to real work.

Does the new management at POST affect your view at all? Stiritz is stepping down as CEO. His President/COO retires in 3 weeks.

HOS 43.15, 27.62
OUTR 61.87, 53.92
BKS 22.72, 18.35
TTWO 22.08, 21.52
TMUS 29.68, 26.11
POST 36.15, 32.02

Just now seeing this thread. Do you still like all of these stocks? They are all on sale vs the price the day of the OP. How many of these are tied to the overall market declining?

nothing fundamental has come out on any of them so yes, I like the same companies as 2 months ago that are now drastically cheaper in price. the market drops, stock drop. its not very complicated.

also you are skipping the caandian ones that have done quite well in the same time frame

its a negative but not as negative as it seems. stiritz os staying on as executive chairman, but that was sort of the role he occupied before as chief allocator of capital and the guy driving M&A. as exec chairman that wont change. the coo leaving is what concerns me but only because they are losing a good man. hes in his 70s so its not shocking.

edit: COO is 66, thought he was older