Green Mountain Coffee Roasters is reporting earnings tomorrow after market close. Here are a few thoughts and questions on LST’s mind for tomorrow:

For the Quarter and Full Year:

  • Will GMCR (finally) go cash flow positive this year? Will cash flow from operating activities turn positive for the full year (CFFO was NEGATIVE in 2010 and 2011, even though it looked breathtakingly positive through Q3)? Note they haven’t managed to go cash flow positive in their audited numbers, since before the Keurig acquisition in 06/07… and 08-11 was their boom years. Oh, and don’t bother about free cash flows… they already guided FCF as flattish.
  • Will GMCR again mysteriously burn cash in Q4 in an amount that equals or exceeds the amount (supposedly) generated in Q1 + Q2 + Q3 combined this year? LST is surprised that no one has publicly pointed out that it did this in 2010 and 2011…SEE DIAGRAM BELOW SEEING IS BELIEVING
  • How have the following impacted top-line volumes, and margins: Starbucks Verismo, Private Label Competition, K-cup Price Cutting / Brewer Rebates, Growth of Ekobrew and other Reusable K-cup filters, and introduction of competing All-In-One single serve brewers?
  • Why is Larry Blanford leaving now? Wasn’t he supposed to leave later?









Guidance and Looking Forward:

  • Will the new CEO Brian Kelley use this opportunity to clean house, clean up the accounting and related problems he is inheriting? Better to take the pain sooner than later… LST may send a letter to Kelley, offering suggestions, i.e. where the dead bodies may be buried.
  • How will Costco Kirkland private label impact margins? Doesn’t it cannibalize?
  • Are lower Keurig brewers on the horizon? Real technology companies cut prices on older generation products…but GMCR is really more of a packaging company.
  • What are the competitive threats that the Starbucks Verismo and competing All-in-One single brewers pose to its existence, longer term?

DDD Doth Protest Too Much: Part I

In late June of this year, a friend told LST to look into shorting Organovo Holdings, (“ONVO”), a “3D printing” concern. LST missed most of the move, but it nevertheless turned out to be a decent short. ONVO naturally led LST to look into the other 3D printing names as well, such as DDD and SSYS. LST avoided shorting them at the time for various reasons, including:

  • There appeared to be a real underlying 3D printing growth story, though LST was not able to determine who would be the winners
  • Certain growth oriented investors and promoters, who had previously (and successfully) promoted names like CMG, MAKO, BNNY, MNST, etc. were saying that DDD was the real deal, the best name among its peers, etc… so LST figured the risk of a continued parabolic move up were real
  • No one mentioned the possibility of fraud or accounting issues; rather, most of the skeptical comments swirled around “overvalued”, “overextended”.

LST kept these names on the back burner…until an article critical of DDD came out this Monday (as shown):

Here’s a link to the above piece. The piece by Gray Wolf Research, “3D Systems: At the Peak of Inflated Expectations” that Douglas House refers and comes to agree with, can be found here

LST is generally not a huge fan of seeking alfalfa, but was pleasantly surprised by Douglas W. House and Gray Wolf Research’s work. Not to mention, House comes across as a very articulate, objective, responsible, respectful, and overall nice guy, based on his DDD piece (See the comments section in the piece as well; He responds with clarity and wit, even as some of his detractors do not).

Flash forward to yesterday night. DDD announced the following (after market close):

DDD announced today that it plans to hold a conference call and simultaneous webcast to discuss, fact-check and clarify several materially inaccurate statements and conclusions made in recently published articles related to various matters including its calculation of growth, accounting methods and acquisition activities on Monday, November 19, 2012, at 8:30 a.m. Eastern Time.

“We are aware of certain recent articles and their materially inaccurate and misleading conclusions.  We reaffirm the accuracy of our public filings and accounting methods in all respects, and are pursuing legal remedies to hold those responsible parties accountable for what appears to be malicious, irresponsible and self-serving articles.  We look forward to discussing, fact-checking and clarifying these inaccuracies for the benefit of our shareholders, customers and partners, who we believe have been irrevocably harmed by these articles,” said Abe Reichental, President and CEO of 3D Systems

While the Douglas House piece elevated LST’s interest in shorting DDD, it is the company’s unexpected response (so far) that has put the nail in the coffin. You can assume that LST will initiate a starter short position (in some form) in the coming days. Specific problems LST sees with DDD’s response:

  • DDD Says it is “Pursuing Legal Remedies” - Note that the stock of companies who go after critics, and pull the legal card, tend not to fare so well. These types of companies who shoot the messenger tend to betray a guilty conscious. The response is a classic Spy the Lie* moment.
  • Refers to the articles as “Malicious, irresponsible, and self-serving” - LST found the article well-intended, responsible, and not self-serving (or at least no more self-serving than DDD). LST believes the management is looking to distract and intimidate its critics. It is quite ironic that DDD is picking on one of the most even-toned skeptical pieces that LST has seen in recent memory.
  • DDD does not say the claims are false - DDD skirts around the issue with sweeping statements like “We reaffirm the accuracy of our public filings and accounting methods in all respects”, or “their materially inaccurate and misleading conclusions”. Nowhere does DDD simply say the claims are false. LST sees this, too, as a poor attempt to distract.
  • Why Not Simply Provide Supplementary Disclosure on all the Acquisitions - Sunshine is the best disinfectant, after all.

LST is likely going to do more work on this and related names. As of now, DDD reminds LST of the not-so-rare earth schemes, like MCP, REE, etc. back in 2011. The similarities are quite amazing. Just like the not-so-rare earth names in 2011, there is a legitimate business trend in 3D printing land. HOWEVER, the publicly traded names are probably not the best vehicles to benefit from the said trend. To make matters worse with DDD, looks, walks, and sounds more like a plain vanilla roll-up.

DDD, then, is not a valuation short: it is looking more and more like a Fad short, where the market has confused this roll-up for something it is not. LST leaves you with a list of concerns as identified in the above-mentioned pieces.


  • A garden variety roll-up that is perceived to be, and promoted as, a hot growth/tech play (note that roll-ups trade at very low P/E multiples)
  • Concerns that there is channel stuffing
  • Issues with poor disclosure, accuracy, and quality of organic growth; that core growth is deteriorating even as the consolidated #s look fine due to acquisitions
  • No true earnings growth (a.k.a. free cash flow)
  • Reliance on capital markets for growth; DDD needs the market, the market doesn’t need DDD
  • R&D underinvestment relative to competitors, which isn’t exactly what you find in true growth names
  • Downgraded auditors back in 2003, from a big four firm to a more regional one (went from Deloitte to BDO)
  • Most recent acquisitions’ year over year growth over comparable 9 month period (Z-corp and Vidar) is flat
  • Management says revenue from “The Cube” will be immaterial for the rest of the year

A 58-Slide Glimpse Into the Mind of a Few Stock Promoters

While the markets remain closed, straight from the horse’s mouth…


Value Investing Congress Day 1: Are the Long Ideas Good … Short Ideas?

Listed below are all the ideas pitched yesterday, the first day of the Value Investing Congress.

Many market participants will look for reasons to agree with the pitched ideas, and will initiate a 1% position if they feel sufficiently comfortable. After all, so-and-so is long ___, has done the research, etc. (of course, this also makes for a convenient excuse if the position goes wrong, and LPs need an answer; blame someone else!).

LST, ever the contrarian, wonders if the longs that were pitched - at least some - might actually end up making good/great shorts (or at least serve as the genesis of some good/great short ideas).

So instead of looking at the ideas pitched as potential longs, LST may look through these (and related names) as potential shorts.

After all, LST doubts that these participants are  sharing their investment theses out of the kindness of their hearts; rather, they hope (and need) a greater fool that will let them exit their positions. To LST, that smells a lot like… motivated sellers.

The Long Ideas:

Bill Ackman / Pershing Square Capital Management - GGP, JCP, PG

Barry Rosenstein / Jana Partners - AGU

Guy Gottfried / Rational Investment Group - CLK, CAM (trade on TSE)

Mick McGuire / Marcato Capital Management - ALEX, GY, BRP

Whitney Tilson / T1 Partners - NFLX, BRK.A, HHC - Tilson suggested he had a short idea in this interview. Not sure what happened.

Kian Ghazi / Hawkshaw Capital - LAYN

John Mauldin / Millennium Wave Advisors - Seems to like MON , though he’s (apparently) more of a “macroeconomic thinker and writer”

The Short Idea

Then there was Zack Buckley / Buckley Capital - He actually had the cojones to pitch a short, SPLK . Ker Splunk.

Make no mistake: some of the above ideas may likely end up being home runs (on the long side). That said, money is often made discounting the obvious, and betting on the unexpected…


Is Amazon a High Frequency Trader and Deceptive Marketer, All In One ?

LST noted that the Keurig V700 Vue costs only $134.95 after rebate with a picture to prove it:

LST checked ~15 minutes ago and…

So much for zee price stabilitee … it’s as if Amazon and the OEM are utilizing tools and tactics not that different from  “stop-loss” seeking algos in trading…except these are prices of consumer goods, not financial securities…

There are also a few other possibilities:

(A) Other consumers also noticed the $134.95 after rebate price for the Keurig Vue V700 and all proceeded to purchase one over the weekend. The demand exceeded the expected demand, and AMZN’s algos automatically adjusted the price upward to reflect this (temporary) discrepancy between actual vs. expected demand.

(B) Could be a discrepancy between actual vs. expected demand due to some other reason. Same result, same story.

(C) It’s a late night glitch.

Here’s the thing: LST has been tracking the Keurig Vue V700 prices on AMZN and…they’ve been steadily trending down.

- updated 2012 10 03 4:41 PM EST -

It looks like LongShortTrader was on to something after all. As of today, you can once again purchase the Keurig Vue v700 for $134.50 (after rebate). Why you would want to do that is another question…

The Keurig Vue V700 Brewer Now Costs $134.95 After Rebate

Keurig/GMCR’s new Vue platform (which is not compatible with k-cups) was supposed to be the “next generation” single serve coffee brewer… which is why it now only costs $134.95 after rebate - or nearly 50% less than the original “suggested retail price” of ~$250. So much for the “we can raise prices” and  “next generation brewer” nonsense.

For the mathematically challenged:

(1) Current cost of the Vue V700 on : $184.95

Please kindly disregard the “Only 11 left in stock” lie shown in the image below. Amazon has been saying that for several months.

Keurig mail-in rebate: $50.00

Final Price: $134.95

Why one would want to buy this crap, THAT LST doesn’t know. So does this mean GMCR is a razor, razor blade business? LST questioned this claim in this report and stands by that analysis. Note that Sam Antar also found similar issues with their reported margins.

Are the People over at Qihoo 360 This Dumb ?

Qihoo 360 (“QIHU”) is what some would call a “battleground stock.” On one corner, you have short seller Andrew Left over at Citron Research. On the other corner you have Kaifu Lee (former Google China exec), who initially defended QIHU, and then went out of his way to start a website called . Kaifu must have had a lot of time on his hands.

Well, the following press release  just issued by QIHU (thanks to the friend who tipped LST off) looks more like a $20 million market cap penny stock promotion rather than a multi-billion $ market company’s press release. See for yourself:

Press Release

Market Influences That Drive Equities Forward - Industry Report on EarthLink, Inc. and Qihoo 360 Technology Co. Ltd.
Sep 26, 2012 (Marketwire via COMTEX) — Moments ago, introduced new coverage of EarthLink, Inc. (NASDAQ: ELNK) and Qihoo 360 Technology Co. Ltd. (NYSE: QIHU). Full outlook, analysis and consensus opinion is available to readers via the links consistent delivery of accurate analyses relies solely on two factors, namely: market awareness and industry insight. Recent market drivers include August’s existing home sales increasing more than expected within the U.S., a surprise slip in U.S. initial jobless claims in the week ending September 15, 2012 and the spark of U.S. housing starts over the last month. When it comes to discovering the right edge at the right time, all these factors play into effect. For a deeper understanding of the mechanics behind these events and how it can affect your portfolio, please refer to our email newsletter delivered to your inbox.

Dividend Seeker is releasing new coverage on EarthLink, Inc. for its current position within the technology sector. EarthLink, Inc. (EarthLink) is a network, communications and information technology (IT) services provider to business and residential customers in the United States. The Company operates in two segments: Business Services and Consumer Services. A copy of this report featuring EarthLink, Inc. (NASDAQ: ELNK) is available at:

Dividend Seeker has released research on Qihoo 360 Technology Co. Ltd. for its changing role within the technology sector. Qihoo 360 Technology Co Ltd (Qihoo 360), formerly Qihoo Technology Company Limited, is engaged in the operations of Internet services and sales of third party anti-virus software in the People’s Republic of China. It provides Internet and mobile security products in China. To access the full research report on Qihoo 360 Technology Co. Ltd. (NYSE: QIHU) we welcome investors to visit:

For those looking to grow their portfolio and increase their net worth, Dividend Seeker is the right choice. Simplify your due diligence process and access investing tools and tips to head-start your investments. Join the community, subscribe to our newsletter and begin to experience the power of information. The more relevant data you have, the more opportunities you discover.

        Edward Harris
        [email protected]

Here’s the link:  QIHU’s idiotic Press Release

Memo to QIHU and QIHU Shareholders : Are you guys really this dumb ? Or Desperate? Both?


- UPDATED 2012 09 27 2:02 PM EST -

Looks like QIHU removed that idiotic press release…too bad I copy/pasted for that very possibility.


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