Behind The Idea

We couldn't wait to get to our year-end review on Behind the Idea, so we're sharing it before your Thanksgiving week travel. It's our 100th episode, and the last episode of our Gone till November special series, a more introspective quartet of episodes. We also discuss on the podcast one other reason why we've released this early. Topics Covered 3:00 minute mark - The Alphies - categories 4:15 - Favorite guest 12:15 - Favorite story 27:00 - Most interesting idea 35:16 - Most surprising stock performance 41:15 - Least surprising stock performance 46:30 - Best performers 49:15 - Listener awards Learn more about your ad choices. Visit megaphone.fm/adchoices

Over the last two weeks, Mike and Daniel have pitched respective long ideas. This week, we looked backward at mistakes we've made in our investing careers. The theory goes that your investing mistakes also amount to your investing tuition, and that true wisdom is learning from others' mistakes, rather than your own. I can only hope there's something for you as listeners to learn from our mistakes, as broken down on today's podcast. The investments in question date to 2016 and 2017. Mike went long on Gilead Sciences (GILD) based on their scientific prowess and low multiple, and even as his thesis sailed on him with Gilead's acquisition of Kite Biopharma, he couldn't find the exit door. Daniel went long Uniti Group (UNIT), even having concerns about its failure to cover its dividend and what the huge yield portended, let alone the binary risk that was introduced into the stock. We hope there are lessons to be learned from our mistakes. Topics Covered 4:00 - Mike's bad choice - Gilead Sciences (GILD) 6:00 - Wh

We continue our special November series. Mike shares his long thesis for Varian Medical Systems, an industry leader in oncology treatment devices that has a lot of attractive business aspects, though it's valuation is also challenging. Daniel tries to probe the thesis for any gaps, but the moat here seems quite strong. Topics Covered 5:00 minute mark - Introduction to Varian Medical Systems and the business case 12:40 - How much does it matter that there are two revenue lines in the income statement? Oncology vs. Proton and Product vs. Service 19:30 - Any reason to think they are transforming more to a service business?  24:30 - Market and customer relationship strategy... moat around business. 31:00 - Is a throughput based model something to be concerned about? 36:00 - Valuation 53:30 - The under the radar aspect of VAR. Learn more about your ad choices. Visit megaphone.fm/adchoices

We kick off a special November series where we stop breaking down other people's ideas and try to dissect our own. Daniel shares his long idea on Stitch Fix, a fast-growing e-commerce clothing company that also will have to face a lot of competitors and skeptics as it tries to scale to profitability. Mike plays devil's advocate to interrogate the thesis. Topics Covered 3:30 minute mark - SFIX thesis 6:00 - What do you like about SFIX? 11:00 - Actual experience with Stitch Fix 20:00 - Business model 25:00 - Growth prospects of retail clothing market SFIX is operation in 31:00 - Where does SFIX fit in the market of fragmenting consumer preferences? 34:30 - How does SFIX handle inventory management? 37:00 - Is SFIX's customized really a big advantage over other retailers? 46:00 - How much choice do consumers really have? 52:00 - Valuation discussion Learn more about your ad choices. Visit megaphone.fm/adchoices

There are three sorts of stories we've gravitated towards in the past 95 episodes of Behind the Idea: Value traps and/or value plays, the sorts of junk we might invest in. Examples: Cars.com (CARS), AT&T (T), Dell (DELL), Kelloggs (K) from the short side. Growth stories that break our value-oriented brains. Examples: Amazon (AMZN), Shopify (SHOP), Crowdstrike (CRWD), Lyft (LYFT), PagerDuty (PD) from the short side. Battleground stories or news stories. Examples: Boeing (BA), PG&E (PCG), Chipotle (CMG), Trupanion (TRUP). This week we cover Teladoc (TDOC), which falls squarely in categories 2 and 3. The company is a fast grower on the top line, but it's yet to crack break even profitability metrics. We've published many short ideas on the company on Seeking Alpha, but we recently published a PRO+ top idea by Value Alpha that takes the long side. As with many of these stories, there are both exciting things going on and questions raised that deserve a closer look. We break down the long case, and then we ra

On this week’s Behind the Idea, we jump right into the long case for a beloved dividend company and notorious corporate name, Altria, ticker symbol MO. We speak with Atlas Research about his bull case for Altria as a stock that will beat the S&P 500. There are the recent concerns around vaping, the break-up of the Philip Morris merger, and the ESG angles and squeamishness around owning a cigarette stock. Depending on your predilection, that’s either a recipe to stay away or the very reason to buy. Atlas is on the long side and makes the case as we grill him on this week’s Behind the Idea. Topics Covered2:45 minute mark – reviewing the past few years for MO and the bull case8:15 – The obvious value story, but is it…too obvious?11:45 – Looming liabilities for Juul?15:15 – Looking at the Phillip Morris merger18:15 – The ESG angle21:45 – Addiction driven models24:15 -The MSA’s legacy28:15 – What role does cannabis play for Altria?34:15 – The economics and regulatory outlook for vaping38:15 – Summing up the invest

Activists come with a reputation, and few have as big a reputation as Elliott Management. AT&T (T) also comes with a reputation. The two come to ahead with Elliott Management's recent letter advocating AT&T refocus on core businesses. The letter is very compelling on where AT&T went astray, and a little more predictable on what they should do next. But at a 10x forward PE, there's not much that needs to go right. So does Elliott's argument make sense? Are AT&T shares worth turning on? We discuss this week on Behind the Idea. Topics Covered 3:15 minute mark - Elliott Management's takedown of AT&T8:00 - Basic summary of Elliott's prescription9:15 - Key graphics/charts from the letter13:00 - The value/special situations investor funnybone16:45 - Underownership of AT&T - lack of confidence, also an opportunity?21:45 - Why the loss of DirecTV and Time Warner execs is so alarming26:45 - How much of this ground has been covered before?30:00 - Elliott's Activating AT&T plan 36:00 - Reactions to the road map46:00 - F

Ligand Pharmaceuticals has been both a strong performer over the past decade and a target of short sellers for some time. The stock has struggled over the last 18 months, though, and Seeking Alpha author 8 Diamonds Advisors feels that the stock has become a strong buy again. The thesis rests on the company's shots on goal approach and its more diversified model. We discuss whether this holds up and what that means for investors. Topics covered:  3:15 - Key elements of 8 Diamonds Advisor's thesis and understanding the company's products 6:15 - "Shots on goal" - what does that mean and how does it work? 15:45 - The challenges in analyzing the business model 19:45 - Management's place in the thesis 24:15 - What's gone on the past few years? 26:45 - The short theses over the year 35:45 - The Promacta divestment and a share buyback (?!) Learn more about your ad choices. Visit megaphone.fm/adchoices

Not that price is truth, but the price chart for Range Resources over the past five years is really ugly. But the company has long been a favorite of Seeking Alpha authors. We try to pick apart this bearish market consensus vs. bullish author sentiment with an idea from KCI Research Ltd. on the company and why its valuation is too cheap to ignore.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Tim Heitman of Investing 501 joins us to discuss his Hill International thesis. He likes the stock as a turnaround story and on growing gross profits, as well as some accounting quirks that may be hiding the opportunity from the market.  Learn more about your ad choices. Visit megaphone.fm/adchoices

This trailer previews our initial two shows on our newest podcast channel, The Investing Edge, from Value Investor's Edge Live hosted by J Mintzmyer, and The Razor's Edge, hosted by Daniel Shvartsman and Akram's Razor. Our excerpt for Value Investor's Edge Live is from our first episode, where J Mintzmyer speaks with Robert Bugbee of Scorpio Tankers about the company's comfortable cash position and the pending catalyst of IMO 2020. Our excerpt from The Razor's Edge is from the first episode, which covers Disney, Netlfix, and the streaming universe. Daniel Shvartsman asks Akram's Razor about whether Netflix can solve a budding challenge - too much content on the service. The Investing Edge is a podcast channel on Seeking Alpha that features shows from different Seeking Alpha authors, with a focus on their unique investing style. Authors will speak with CEOs and industry experts, break down key market stories and topics, and share insights on how they research new investments. The first two shows on

Safety in Value, a Seeking Alpha Marketplace author, joins us to discuss his Bluegreen Vacations thesis. He likes the stock as it trades below its previous deal price, and likes the underlying business as well. We discuss those elements, the risks to parent company BBX Capital's bid, and, because we couldn't resist, how this fits into Joel Greenblatt's investing philosophy. Learn more about your ad choices. Visit megaphone.fm/adchoices

Through three episodes to this point on Joel Greenblatt's You Can Be A Stock Market Genius, Mike and I have discussed what we like about his famous special situation investing strategies, and what doesn't work. We've also shared our enthusiasm for the light touch he applies to his writing, and the way he doesn't appear to take himself too seriously. Chapters 7 and 8 bring that feeling home. Chapter 7 because it shares how Greenblatt advises his readers to do the actual research, and one component is to borrow ideas from other investors. It's an obvious concept when you think about it, but it also suggests a touch of humility that plays out throughout the book. We look at Greenblatt's sources and favorite books to understand the rest of the book better. Then, Chapter 8 is the shortest chapter, and it underlines Greenblatt's entire philosophy as I understand it. Basically, investing and growing your money can give you time and options later on. When active vs. passive remains a hotly contested topic, and when

Investors looking for value stock investing opportunities with catalysts ahead will be interested in Jorge Robles' perspective on UK low-cost gym operator Gym Group. The company has a reasonable competitive position, a misunderstood path to profitability, and an attractive free cash flow yield. Mike and Jorge explore the catalysts to realize the stock's value, competition within the industry, the impact of private equity ownership on companies, and the role Brexit might play in weightlifter behavior.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Chapters 5 and 6 of You Can Be A Stock Market Genius find our hero and author, Joel Greenblatt, walking on the wild side, as he looks at bankruptcies, LEAPs, restructurings, and other 'odder' corners of the market. Bankruptcies and similar topics in these chapters share some of the classic special situation traits of spin-offs and the like, but they also extend to a messier area of the market. So what holds together? We discuss that as well as some of the lessons Greenblatt drops in these chapters. Learn more about your ad choices. Visit megaphone.fm/adchoices

We continue our discussion of Joel Greenblatt's classic book, You Can Be A Stock Market Genius, with a focus on chapters 3 and 4.Chapters 3 and 4 of the book are the ones everyone remembers, especially re: spin-offs. The principles Greenblatt lays out - shareholder mismatch, the opportunity to find overlooked ideas, the chance to do close reading - all seem to be relevant today, and yet spin-offs don't seem to be as attractive a category. We break that down as well as risk arbitrage and merger securities. Learn more about your ad choices. Visit megaphone.fm/adchoices

We are big fans of Joel Greenblatt and his book, You Can Be A Stock Market Genius. We decided to break it down to see how it applies to today’s market, what key lessons are, what the best quotes from the book are, and our favorite Joel Greenblatt dad jokes. We start with chapters 1 and two, which lay out Greenblatt's mindset for investing. Topics Covered 3:30 minute mark - Breaking Down Chapter 1 - The Greenblatt Mantra 7:30 - The individual investor advantage 14:30 - The efficiency of the markets 17:45 - Chapter 2 and the persistence of Greenblatt's approach 24:30 - Different investing styles for the individual investor 28:30 - Whither the value factor? 35:30 - Key quotes and jokes Learn more about your ad choices. Visit megaphone.fm/adchoices

Bluegreen Vacations (BXG) is a timeshare developer in a curious situation - its majority owner pulled a bid for the minority of the company due to a since resolved lawsuit, but the shares trade well below the previous offer. Timeshares draw their own questions, and the market has been more volatile since the bid was pulled. We discuss the idea and what that could mean for shareholders and special situations investors going forward. Topics covered: 5:00 minute mark - Overview of the busted merger arbitrage story. 8:45 - The timeshare industry and the underlying ups and downs therein 16:30 - Working down the income statement 20:00 - Breaking the Bass Pro Shops lawsuit down 23:00 - Manhattan club, time shares in NYC 31:30 - How does sales operation of a time share work? 33:30 - Time share business model and why does BBX Capital need to pay a big premium? Learn more about your ad choices. Visit megaphone.fm/adchoices

Two things we usually don't do on Behind the Idea are talk about big picture macro-economic ideas, and delve into asset classes outside of stocks. We've focused on individual investing ideas through the vast majority of our episodes over the last 18 months, and that's where we've made our bones. But Mike Taylor rejoins the podcast this week after paternity leave (congrats Mike!) and he's jazzed up about Ray Dalio's recent argument that a paradigm shift is coming. So jazzed up that he invested in GLD, GDX, and GDXJ itself, based on Dalio's article. Gold leads to a lot of psychological analysis and self-consideration, and to considering the philosophical basis for an investing strategy. Without spoiling it, I have the more skeptical, 'what is behind the results that gold has achieved it in the past' orientation, while Mike has the more instrumental, 'gold has proven to be a ballast to many a portfolio, so why not' approach. Topics covered: 2:30 minute mark - Introduction to Ray Dalio and his recent article

We speak with Ed Silverman, a longtime follower of the industry who has run the blog Pharmalot for over a decade. Now on StatNews, he joins us to share his insight on the industry and the pressures its facing, and to follow up on our discussion on Walgreens from two weeks ago to see how these pressures might affect the company. Learn more about your ad choices. Visit megaphone.fm/adchoices