Author Topic: SYTE - Enterprise Diversified  (Read 215624 times)

andgroup

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Re: SYTE - Sitestar
« Reply #230 on: September 28, 2016, 08:44:58 AM »
You mean like the gymnastics that Buffett and Munger pulled by using Blue Chip Stamps to acquire See's Candy, or buy up shares in Wesco?  Or the numerous other deals they did like that?  Yeah, you're right, that didn't work out too well.


Ballinvarosig Investors

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Re: SYTE - Sitestar
« Reply #231 on: September 28, 2016, 09:14:00 AM »
Finally sold out, so this will be the last comment from me unless Sitestar somehow becomes attractive again.

Firstly, when I bought my shares several years ago, the stock price was below the sum of the parts valuation. When the likes of Jeff Moore got involved I thought finally there were enough shareholders behind the thing that we could see full value of the company unlocked. At that point, no one suspected how bad things were at the top, let alone that management needed to be booted out. Needless to say, I was fine with this, and hoped that with shareholders running the company, they would do their best to maximise shareholder value (I assumed the company would be liquidated, or run as a going concern). At no point did I even consider what would happen next. I guess it's at this point, my thoughts diverged with those of management. Whatever you say about the investment properties, or the internet business, at least you could get a handle on the value of these things. The same cannot be said of Alluvial's hedge fund, or the HVAC value fund that Sitestar have gotten into. For me, these vehicles are too opaque, there is no transparency with them whatsoever (what exactly are we invested in here, what is the fee structure, etc.). Perhaps these are great opportunities, perhaps Steve Kiel is a great guy, we have to take their word for it. As a fiduciary, I feel I just can't take that chance. Especially when I look at what happened to SED Intl, Steak and Shake, Chanticleer, etc. I've learned having a value guy at the helm hasn't been a guarantee that delivers the best outcome for shareholders. That is why I am out.

InelegantInvestor

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Re: SYTE - Sitestar
« Reply #232 on: September 28, 2016, 11:23:53 AM »
All of you who are making excuses are missing the point. Steven Kiel may be the greatest investor ever. He may be making choices that will ultimately enrich holders of Sitestar. That is irrelevant- the ends do not justify the means. He said one thing before he was in control and did the opposite when he was.  He and his handpicked Board voted themselves the right to buy a huge number of shares at below market and below intrinsic value, with no independent oversight. Others were not allowed to participate. There is a massive conflict of interest here. 

The posts speculating about Kiel's "insecurity" and such are laughable ex post facto justifications of actions that were clearly and undeniably unethical. People who behave unethically typically do not do so only once.


andgroup

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Re: SYTE - Sitestar
« Reply #233 on: September 28, 2016, 12:11:49 PM »
I'm not missing your point, I just choose not to place as much weight on your point as you do.

Some people hold principled philosophies and some people hold pragmatic philosophies and some people hold a mixture.

Investing is a probabilistic endeavor and when I place myself in Steven's shoes I can think of many reasons that he could have made the choices he did and still felt like he wasn't being unethical at all.

The volume on that stock averages what 50,000 shares per day at .06 cents per share that is 3,000 dollars per day?  Could he have raised the money he needed (3-4 million) to do these next deals by dumping those shares on the open market?  Or would that have collapsed the stock price due to a lack of demand for the shares?  Would that be fair to current shareholders or to the people in his fund? 

So he placed the shares in bulk with lockup provisions. He raised needed capital without crashing the stock price and boxed out the former CEO.  Acquired more capital to do even larger deals. Probably gave other larger investors confidence to invest even more capital because he is firmly in control now.

If you are going to be waiting around to find anyone on this planet who has zero perceptions against them of being unethical before you invest. You might want to upgrade the size of your mattress.

I personally do not believe that it follows, that just because us smaller shareholders got clipped a bit while he was trying to locate the right structure that this automatically means Steven Kiel is unethical or dishonest.

If you want to make the private placement your own grandstanding issue that's fine. Sell. I could be wrong, but I do not agree with you.

frugalchief

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Re: SYTE - Sitestar
« Reply #234 on: October 01, 2016, 12:09:34 PM »
I like the idea of freeing up capital and moving it toward seemingly higher value assets/companies. I am still curious as to why they chose HVAC.

Not a shareholder, but learning a lot and would like to follow some of this path in the future. The dilution item is still troubling even if it does erode value per share.

They seem Iike good people who may have taken slight advantage of shareholders for their own benefit.

I'm not a shareholder...actually just came across the company yesterday (forgot where), then found this thread.  I have interest in Sitestar b/c my background follows a lot of their progression....started in real estate investing, brokerage, and property management, then became CFO at a 'mom & pop' HVAC business.  HVAC is a great industry to get into, IMO.  If they are doing it right and not overpaying, it could compound for them greatly.

LR1400

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Re: SYTE - Sitestar
« Reply #235 on: October 01, 2016, 07:22:32 PM »
I like the idea of freeing up capital and moving it toward seemingly higher value assets/companies. I am still curious as to why they chose HVAC.

Not a shareholder, but learning a lot and would like to follow some of this path in the future. The dilution item is still troubling even if it does erode value per share.

They seem Iike good people who may have taken slight advantage of shareholders for their own benefit.

I'm not a shareholder...actually just came across the company yesterday (forgot where), then found this thread.  I have interest in Sitestar b/c my background follows a lot of their progression....started in real estate investing, brokerage, and property management, then became CFO at a 'mom & pop' HVAC business.  HVAC is a great industry to get into, IMO.  If they are doing it right and not overpaying, it could compound for them greatly.

What kind of returns and margins do you see in the HVAC sector?

What size total revenue numbers are these companies typically?

frugalchief

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Re: SYTE - Sitestar
« Reply #236 on: October 03, 2016, 07:54:47 PM »
I believe your pre-tax earnings should be 15%-25% of revenue.  We are small, 7.5 employees, will do about $2mm in revenues this year.  Did $1.25mm last year.  We are 3.5 years young, and previous capital allocation was awful, resulting in 0% return, even negative.  (There was no 'business' focus on the business, so things will change)

Most companies I'd guess are doing revenue of $500,000 - $5,000,000.  This industry is a majority of mom & pop companies...lots of single operators, and single operators + helpers...not ran like a business, just provides an income/lifestyle.  Companies with a few technicians (2-5) - probably average $1mm - $5mm.  I believe there are few companies (in the area I live - South Texas) that dominate and probably do $10-25mm, with the largest company maybe doing $50mm.  This is purely a guess, but I see a trend....a mature operation should produce $1mm per technician (It's about what we are doing in our operation).

One thing the biggest players do is add plumbing and electrical services into their HVAC business.  It's a great play - you become THE company to take care of issues in your neighbors homes.  Something that'd be nice for Sitestar to maybe think about to create more value for those customers.

It's a seasonal business.  Summers are tough work, but we can shoot the lights out.  About this time of year it gets tough.  Our worst month (January 2016) was 15% of our best month (July 2016) (**should note, January 16 was an anomaly...I really doubt we'll see that again...our winter months are usually 40-50% of our summer months).  I'd imagine the HVAC business they are building in AZ will follow similar trends.

LR1400

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Re: SYTE - Sitestar
« Reply #237 on: October 03, 2016, 07:58:30 PM »
I believe your pre-tax earnings should be 15%-25% of revenue.  We are small, 7.5 employees, will do about $2mm in revenues this year.  Did $1.25mm last year.  We are 3.5 years young, and previous capital allocation was awful, resulting in 0% return, even negative.  (There was no 'business' focus on the business, so things will change)

Most companies I'd guess are doing revenue of $500,000 - $5,000,000.  This industry is a majority of mom & pop companies...lots of single operators, and single operators + helpers...not ran like a business, just provides an income/lifestyle.  Companies with a few technicians (2-5) - probably average $1mm - $5mm.  I believe there are few companies (in the area I live - South Texas) that dominate and probably do $10-25mm, with the largest company maybe doing $50mm.  This is purely a guess, but I see a trend....a mature operation should produce $1mm per technician (It's about what we are doing in our operation).

One thing the biggest players do is add plumbing and electrical services into their HVAC business.  It's a great play - you become THE company to take care of issues in your neighbors homes.  Something that'd be nice for Sitestar to maybe think about to create more value for those customers.

It's a seasonal business.  Summers are tough work, but we can shoot the lights out.  About this time of year it gets tough.  Our worst month (January 2016) was 15% of our best month (July 2016) (**should note, January 16 was an anomaly...I really doubt we'll see that again...our winter months are usually 40-50% of our summer months).  I'd imagine the HVAC business they are building in AZ will follow similar trends.

Great info! Thanks!

May go after something similar further east.

What are you specifically doing with regard to capital allocation that others a were lot, if you dorm mind me asking?

frugalchief

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Re: SYTE - Sitestar
« Reply #238 on: October 04, 2016, 01:33:41 PM »
Right now, the best return I can make on our money is by cutting fixed and variable costs that aren't warranted to returning more value to the company.  That's already quite a bit of savings.  Now we are focusing on building our brand more. Then we will do those add-ons I mentioned.  In our market, the best use of capital is to continue to grab market share.  While results may not be immediate, the potential return is extremely attractive.

jawn619

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Re: SYTE - Sitestar
« Reply #239 on: October 04, 2016, 02:01:02 PM »
Finally sold out, so this will be the last comment from me unless Sitestar somehow becomes attractive again.

Firstly, when I bought my shares several years ago, the stock price was below the sum of the parts valuation. When the likes of Jeff Moore got involved I thought finally there were enough shareholders behind the thing that we could see full value of the company unlocked. At that point, no one suspected how bad things were at the top, let alone that management needed to be booted out. Needless to say, I was fine with this, and hoped that with shareholders running the company, they would do their best to maximise shareholder value (I assumed the company would be liquidated, or run as a going concern). At no point did I even consider what would happen next. I guess it's at this point, my thoughts diverged with those of management. Whatever you say about the investment properties, or the internet business, at least you could get a handle on the value of these things. The same cannot be said of Alluvial's hedge fund, or the HVAC value fund that Sitestar have gotten into. For me, these vehicles are too opaque, there is no transparency with them whatsoever (what exactly are we invested in here, what is the fee structure, etc.). Perhaps these are great opportunities, perhaps Steve Kiel is a great guy, we have to take their word for it. As a fiduciary, I feel I just can't take that chance. Especially when I look at what happened to SED Intl, Steak and Shake, Chanticleer, etc. I've learned having a value guy at the helm hasn't been a guarantee that delivers the best outcome for shareholders. That is why I am out.

+1