Festival of Stocks # 12

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November 27, 2006 | Others | | Author Asif

Rick of Value Discipline is hosting the 12th edition of the Festival of Stocks on his blog this week. The post by George of Fat Pitch Financials about the spin-off company Sally Beauty Holdings (SBH) is a must read. My post about Coinstar was also included in this festival and Rick takes my short analysis of Coinstar (CSTR) further and has provided some Free Cash Flow (FCF) numbers for the last five years. However the FCF numbers I get by using the Cash Flow Statement from Coinstar’s 2005 Annual Report are significantly different from the ones posted by Rick. I plan to check with him to see how he arrived at his numbers. Here are the Free Cash Flow numbers for Coinstar over the last three years based on my calculations,

Year Net Income Free Cash Flow
2005 $22.27 million $59.22
2004 $20.37 million $17.81
2003 $19.55 million $28.61

As I mentioned in my post about Coinstar, I would not want to short this cash flow positive company but continue to find the $30 Jan 2008 naked LEAP puts (LUDMF.X) attractive.

I may not blog a lot until the end of this month as I get the last investment newsletter of 2006 ready for publishing on December 1st.




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Comments

  1. Jason
    December 5th, 2006

    Just saw the December pick. Is WSDT.PK too late to get in? Looks interesting just not sure at this price point.

    Thanks!

  2. Asif
    December 5th, 2006

    Jason, I have to admit that the strong 15% appreciation in just 3 trading days took me by surprise as well. As you may be aware, given the limited amount of data available for WisdomTree, it is difficult to value the company. Here is another approach to valuing the company that I did not mention in the newsletter.

    London based asset management company Amvescap (AVZ) closed its acquisition of ETF provider PowerShares on September 18th and PowerShares had $6.3 billion under management at closing. The total price for the acquisition could be as high as $730 million if PowerShares hits certain targets.  

    PowerShares currently has about 66 ETFs and after WisdomTree’s new ETFs are approved, they would have over 60 ETFs as well. WisdomTree’s market cap is currently $691 million and the company appears to have better visibility and momentum on Wall Street. Hence I do see additional upside over the long-term. The stock is volatile and could move either way short-term and that is why I also picked Barclays (BCS) as a second less volatile play on the ETF space. Barclays also has a very attractive dividend yield of 3.8%. 

    If you are currently not a subscriber or did not receive the investment newsletter on the 1st of this month, you can read more about why I picked WisdomTree when it is posted in the archives on the 7th.

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