Author Topic: OSTK - Overstock.com  (Read 130877 times)

Hester

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Re: OSTK - Overstock.com
« Reply #170 on: March 21, 2012, 06:03:55 PM »

That is just a ridiculous comment.  You're willing to piss all over the guy within minutes of the press release (a carbon copy of Sam Antar's morning tweets) being issued and you blindly and carelessly attribute his past employers financial performance to his lack of skill ?!? The truth is you have no fricking clue what role his efforts played in the companies recent financial performance. You just saw it as an easy opportunity to take a shot a Overstock. Plain and simple.

lol, calm down.

I didn't know Sam Antar patented the act of looking at the past business performance of a company that a new executive came from. WTF. Next time I look at the income statement of a company that a new executive worked at for 10 years and see that they lost $100 million on $775 million in sales last year, I'll be sure to check Sam Antar's twitter to make sure he didn't also mention this blatantly obvious fact.

Second, I didn't "blindlessly and carelessly" attribute the past financial performance to his lack of skill. I actually agreed with you in my last post and pointed out not that he has no skill, but rather that he has no noticeable accomplishments.

Read my last post closer and take it easy on the caffeine.


Mephistopheles

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Re: OSTK - Overstock.com
« Reply #171 on: March 28, 2012, 07:25:54 PM »
The proof is in the pudding.  Let's wait and see what changes happen, and how it drives traffic and sales.  I like where he's from, because they need someone who understands Overstock's demographic.  I'm disappointed, like others, that he came from a business that is struggling and it's hard to decipher his work against the business' results.  Like I said, let's wait and see.  Besides, having marketing out of Patrick's hands is already really good news!  Cheers!

Hi Parsad,

I've researched quite a bit about this company, and I like many things about it that have been mentioned about it on this thread. But what worries me is the recent drop in yoy sales, customer traffic, and customer orders, given that a major thesis is the sales growth rates, and especially given that in the same periods Amazon fared much, much better. I know that it's such a short period to measure, especially put up against 10 years of immense growth, but the 10% sales drop in the most important quarter of the year raises a red flag. It's hard to blame it on the Google penalty, given that it was resolved last summer.

So anyway, I was wondering what your take is on this.

Thanks

Parsad

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Re: OSTK - Overstock.com
« Reply #172 on: March 28, 2012, 11:22:01 PM »
The proof is in the pudding.  Let's wait and see what changes happen, and how it drives traffic and sales.  I like where he's from, because they need someone who understands Overstock's demographic.  I'm disappointed, like others, that he came from a business that is struggling and it's hard to decipher his work against the business' results.  Like I said, let's wait and see.  Besides, having marketing out of Patrick's hands is already really good news!  Cheers!

Hi Parsad,

I've researched quite a bit about this company, and I like many things about it that have been mentioned about it on this thread. But what worries me is the recent drop in yoy sales, customer traffic, and customer orders, given that a major thesis is the sales growth rates, and especially given that in the same periods Amazon fared much, much better. I know that it's such a short period to measure, especially put up against 10 years of immense growth, but the 10% sales drop in the most important quarter of the year raises a red flag. It's hard to blame it on the Google penalty, given that it was resolved last summer.

So anyway, I was wondering what your take is on this.

Thanks

I agree...it is a concern.  Unfortunately, you cannot do anything unless you are actually running the company.  You are going to have to factor the risk into your analysis. 

Our contention is that someone who grows a company from zero to $1.1B in revenue in ten years didn't suddenly become stupid.  They still had $1.07B in sales over the last 4 quarters and nearly 25m customers...so it's either an operational miscalculation (inventory selection, pricing, service) or a marketing mistake (O.co, Google penalty, online and offline advertising).  I think it was a little of both, but more on the marketing side.  We'll have to see how they do quarter after quarter going forward, and if there is any improvement with the addtion of Tim Dilworth.  Cheers!
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valueInv

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Re: OSTK - Overstock.com
« Reply #173 on: March 28, 2012, 11:43:53 PM »
Our contention is that someone who grows a company from zero to $1.1B in revenue in ten years didn't suddenly become stupid. 
Careful with that reasoning. Taking a company from $1B to $2B may require a very different managerial skillset than taking a company from 0 to $1B.
They may also be operating in very different environment. This same reasoning was applied to RIMs previous management. The problem is they kept doing what made them successful in the first place when they needed to do something completely different. I have seen companies fail because of this.
Compare how Nokia has responded to the iPhone/Android threat to how RIM has responded to a good case study on this.

Its not that management suddenly turned stupid. They did what was logical - relied on methods that were "tried and true".

Parsad

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Re: OSTK - Overstock.com
« Reply #174 on: March 29, 2012, 12:15:16 AM »
Our contention is that someone who grows a company from zero to $1.1B in revenue in ten years didn't suddenly become stupid. 
Careful with that reasoning. Taking a company from $1B to $2B may require a very different managerial skillset than taking a company from 0 to $1B.
They may also be operating in very different environment. This same reasoning was applied to RIMs previous management. The problem is they kept doing what made them successful in the first place when they needed to do something completely different. I have seen companies fail because of this.
Compare how Nokia has responded to the iPhone/Android threat to how RIM has responded to a good case study on this.

Its not that management suddenly turned stupid. They did what was logical - relied on methods that were "tried and true".

Of course. 

I think you have to take a look and examine what aspects of the business or environment has changed?  Has Overstock's customer base or demographics changed?  Has their retail niche of excess or closeout inventory changed?  Has their competition changed?  Are their competitors using a completely different form of sales?  Does the existing management team have the skills to grow the business further?  Are they still competitive on price, service, execution and shipping?  Are they spending advertising dollars wisely, and with very specific targets in mind?  Are general operating costs adequate...or are they too high?  Is their inventory selection meeting the demands of their customer base?  Is their core customer base growing?  Do they have adequate independent oversight on the board?  Are compensation incentives aligned with operational and shareholder interests? 

These are just a fraction of the questions you ask and run through to determine the strengthes and weaknesses of a business.  And they change based on economic conditions, the competitive environment and simply over the passage of time.  Evaluating a business is never static. 

What Prem may have seen in RIMM 2 years ago, could have changed far more rapidly than he ever expected.  Or even what Steve Jobs saw in Apple ten years ago when he returned, could never have been imagined in less than a decade by virtually anyone else...maybe not even Jobs!  That's why investing is as much art as science.  You calculate risk to the best of your abilities...both tangible and intangible...and then you make your bet and analyze quarter by quarter, year by year to see what portion of your theories have changed.  Cheers!   
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Parsad

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Re: OSTK - Overstock.com
« Reply #175 on: April 02, 2012, 09:53:52 AM »
SEC closes 2009 OSTK investigation.  Wonder what else Sam is going to come up with now!  Cheers!

http://finance.yahoo.com/news/overstock-com-announces-close-sec-130000147.html
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alertmeipp

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Re: OSTK - Overstock.com
« Reply #176 on: April 02, 2012, 10:29:08 AM »
With OSTK near multiple years low?

lessthaniv

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Re: OSTK - Overstock.com
« Reply #177 on: April 02, 2012, 10:33:00 AM »
SEC closes 2009 OSTK investigation.  Wonder what else Sam is going to come up with now!  Cheers!

http://finance.yahoo.com/news/overstock-com-announces-close-sec-130000147.html

Differences between 2011 and 2012:

1) About $8M in excess legal expense due to patent troll lawsuits.
2) About $8.5M in excess Tech related labour costs that has now been reduced in Jan 2012.
3) Contribution Margin was hurt due to Google penalties and branding issues. I look for a potential 1% improvement. On $1B in sales that's another $10M.
4) They paid off $35M in convertible notes, $25M in Master lease agreements, and borrowed $17M from the LOC to help cover this leaving them with $97M in cash. So, CFF where negatively impacted by  ($43M) due to extinguishing debt.

If they can get their top line growth back - that's gravy.

Also, in the last 3 years their working capital requirements have been reduced by $65M and now are ($14M). Sam and his calloused fingered friends suggest OSTK is on the brink of bankruptcy because the working capital is negative. They go on to say that OSTK will have to dilute by raising capital. On the contrary this shows the efficiency of OSTK's model. A consumer buys a rug. The credit card gets charged and collected quickly. The rug gets shipped (customer is happy) and roughly 30 later OSTK pays out the supplier. The fact that they are collecting cash much faster then they need to pay out suppliers is a good thing. Although Sam Antar, in true Chicken Little fashion, believes the world is coming to an end.

OSTK pays out its suppliers in 30 days. Amazon pays out its suppliers in 90 days. In other words, as OSTK gains scale we could see OSTK negotiate longer payable periods and perhaps continue to reduce their working capital needs.

The invested capital is low (sets up a great ROIC) and free cash flow is set to continue to grow.  Ask Mr. B over at Amazon what  the best way to measure this business is!

 ;D


 
« Last Edit: April 02, 2012, 10:35:57 AM by lessthaniv »
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CONeal

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Re: OSTK - Overstock.com
« Reply #178 on: April 04, 2012, 08:24:19 PM »
Been looking at the company for the past few months and while the company is cheap decided to pass for the following reasons.

In my view Patrick's extracurricular activities (the lawsuit) has me wondering what is more important to him.  Building a top notch company or go into raving rants about Darth Vador during conference calls.  While he has a point about the lawsuit, His distractors are actually winning bc they have got him to focus his attention on things that are not related to building the business.  With the appeal, it doesn't seem like this is changing anytime soon nor the legal fees. 

The most important reason for staying away though is sales tax on purchases over the Internet.  This will probably cause a major shift in consumer behavior since most purchases are done to avoid the tax.  If a bill is not passed pretty soon allowing for a federal tax to be charged, some states will prusue it on their own.  If this occurs how will it affect businesses and also the valuations paid in takeovers.

Feel free to point out where I've fallen off the wagon but these are the two sticking points that has me staying away from investing in Patrick and Overstock.

compoundinglife

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Re: OSTK - Overstock.com
« Reply #179 on: April 04, 2012, 09:09:39 PM »

The most important reason for staying away though is sales tax on purchases over the Internet.  This will probably cause a major shift in consumer behavior since most purchases are done to avoid the tax.  If a bill is not passed pretty soon allowing for a federal tax to be charged, some states will prusue it on their own.  If this occurs how will it affect businesses and also the valuations paid in takeovers.


You think there will be a shift in U.S. Internet consumer behavior or specifically in OSTK customer behavior? Also curious what data you used to come to the conclusion that sales tax avoidance is the driver.