Fr. Emmanuel Lemelson Discusses Apple’s Economic Prospects, World Wrestling Entertainment’s Financial Condition And Other Issues by Amvona, Seeking Alpha

Summary

  • Fr. Emmanuel Lemelson talks about Apple Inc., the growth in IOS install base and valuation metrics.
  • Lemelson’s discusses World Wrestling Entertainment’s eroding financial condition and recent board appointments.
  • Interview also includes commentary on the general market outlook as well as KLIC, LGND and GEOS.

(To listen to the full interview, click here)

On March 24, 2015, Rev. Father Emmanuel Lemelson, Founder and President of The Lantern Foundation and Chief Investment Officer of Lemelson Capital Management, appeared on Benzinga’s Pre-Market Prep show to discuss Apple, World Wrestling Entertainment (NYSE:WWE), and other positions held by Lemelson Capital’s Amvona Fund.

In the interview, Fr. Emmanuel commented on the firm’s current long position in shares of Apple, Kulicke and Soffa Industries (NASDAQ:KLIC) and Geospace Technologies (NASDAQ:GEOS) and its new short position in shares of Ligand Pharmaceuticals (NASDAQ:LGND) as well as a brief commentary on Herbalife and Lumber Liquidators. Lemelson also continued his examination of the impact of corporate governance on valuation.

Among Lemelson’s comments on the Benzinga show:

The two things we can know for sure on apple is that the number of participants in their ecosystem in growing, in large part due to defectors from Android. It’s pretty much a guarantee that they are going to increase their capital return policy.

For some of Lemelson’s recent commentary on Apple, click here:

  • Benzinga – This Hedge Fund Manager Is ‘Increasingly Confident In The Success Of Apple Watch (March 09, 2015)
  • Benzinga – Hedge Fund Manager Expects 70-75 Million Apple iPhones Sold In FQ1 (January 27, 2015)
  • Benzinga – Why This Hedge Fund Manager Thinks Apple Watch Doesn’t Need To Succeed In 2015 (January 26, 2015)

On Lemelson Capital’s long position in Kulicke and Soffa, Lemelson said,

The fact of the matter is they’re in a good business. If you look at the current share price around $16.30, about $8.20 is cash, if you take that out of the share price you have a forward PE of something like under 7, maybe 6.8. The new Assembleon acquisition is probably going to grow at a compound annual growth rate of 10% per year.

For some of Lemelson’s previous commentary on Kulicke and Soffa, click here:

On Lemelson Capital’s long position in Geospace Technologies, Lemelson said,

Recently that thing was trading at 14.95 per share, at that price you were buying just cash and receivables and inventory. It’s not a bet on the future price of oil and gas, really what it is, is it’s a bet that at some point production and exploration continue.

All you really need to look at is the supply and demand equation, because oil is a commodity and it’s subject to these forces, it’s interesting if you look at the case of two oil majors, BP and Shell, BP is only replacing about 65% of what they’re shipping, and in the case of Shell is only about 25-26%, this is the lowest in over a decade for these companies. If you look on the demand side, the IEA is still reporting that energy growth needs are going to continue to grow at about 2% per year through 2025. At the rate OPEC is going, and all these other oil majors, if they keep shipping ‘off the shelf’ what they’ve already produced and not replacing it with new reserves, it’s just not sustainable.

For some of Lemelson’s previous commentary on Geospace Technologies, click here:

  • ValueWalk – Lemelson Announces 2% Stake in Geospace Technologies Corp. (October 20, 2014)
  • Benzinga – Shares of Geospace Technologies Close 4.5% Higher, Indicated for Further Gains in Post-Market Session Following Earlier Mid-Day News Lemelson Capital Has Announced 2% Stake (October 20, 2014)
  • SA Market Currents – Geospace +4.2% after activist discloses stake; Ion +5.9% (October 20, 2014)

On February 20, 2015, Lemelson Capital disclosed that it had sold all but one of its shares of World Wrestling Entertainment at “around $16.50”.

There hasn’t been a material gain in revenues for over 7 years and net income has had a pretty steep decline over the last 5 years, and party because of eroding operating margins. The result has been that since YE 2006 owners’ equity has been halved. What WWE is today is a good case study in corporate governance, and they’re really moving in the wrong direction. Typically where you have a financial showing of this variety over a number of years, the board would start to ask questions.

In this case there are two problems, one is the board is anything but independent. The second thing is that you you’ve got this controlling class of shares, and that really sends a message to shareholders that look we’d be happy to take your capital, but we don’t really want you involved in the business in anyway.

Where is the safeguards for shareholders? It leaves them awfully exposed. You have an unsustainable financial situation.

For some of Lemelson’s previous commentary on World Wrestling Entertainment, click here:

On Lemeslon Capital’s former short position on Ligand Pharmaceuticals, Lemelson said,

We covered around 43, and we had shorted around 68. We couldn’t help ourselves, we had to short the company again around 76 ½.

For some of Lemelson’s previous commentary and research reports on Ligand Pharmaceuticals, click here:

  • Benzinga – Exclusive: Emmanuel Lemelson Talks Ligand Pharmaceuticals (August 8th, 2014)
  • USA Today – Money manager betting against biotech firm Ligand Pharmaceuticals (June 16th, 2014)
  • Lemelson Capital’s previous research reports (including PDF versions) on Ligand can be found here.

To listen to the full interview, including commentary on Lumber Liquidators and Herbalife, click here.

Additional disclosure: Short LGND

Emmanuel Lemelson Geospace Technologies