Ben Strubel

Vivendi Group Vivendi SA (EPA:VIV) is a French conglomerate that owns all or part of Universal Music Group, Global Village Telecom, Canal+ SA (EPA:AN), SFR, Activision Blizzard, Inc. (NASDAQ:ATVI), and MAROC TELECOM (EPA:IAM). March 2013 Strubel Investment Management, LLC Wall Street (and, really, the finance industry in any country) appears to have an allergy to companies that are hard to analyze and do not have an exciting “sexy” story to tell investors. Vivendi SA (EPA:VIV) certainly does not have a great story. It’s a hodgepodge collection of assets rammed together under the umbrella of a French holding company. Many of the asset purchases were funded by debt, leaving present day Vivendi with too high a debt burden. (Vivendi assets still far outstrip the debt as we will see in the valuation section.) Vivendi is also hard to analyze (at least by Wall Street standards) since it is really six different companies. On the valuation aspect, we disagree with Wall Street. Given the plethora of private party transactions surrounding many of Vivendi’s assets and comparable companies as well as the publicly traded nature of two of the subsidiaries, we believe it is not hard to come up with a reasonable approximation
Read More »

Strubel Investment Management, LLC 1853 William Penn Way Suite 1 Lancaster, PA 17601 February 13, 2013 Board of Directors Dell Inc. One Dell Way Round Rock, TX 78682 Attention:  Lawrence P. Tu, Senior Vice President, General Counsel, and Secretary Dear Board of Directors: Strubel Investment Management, LLC,  is a shareholder of Dell Inc. (NASDAQ:DELL) (or “the Company”) and provides advisory services to clients who also are shareholders of the Company. We are writing to express our extreme dissatisfaction with the proposed go-private transaction, which we believe grossly undervalues the Company. We are also writing to inform you that we will vote against the proposed transaction and advise our clients who are shareholders in the Company to vote against the proposal as well. The basic function of a board is to oversee management, to hold it accountable, and ensure all shareholders are treated equitably. We believe the board has failed this duty in a dramatic fashion. By allowing such a transaction to take place at a price of $13.65, the board is essentially allowing Mr. Michael Dell to steal the Company from current shareholders. We believe the intrinsic value of the Company is far greater than $13.65 per share. Specifically, the
Read More »

We own a lot of European-headquartered companies (mainly British and Swiss) and a lot of companies that pay dividends. In U.S. business schools, students learn that a portfolio like this is frowned upon for a few explicitly stated reasons and some that are more subtly implied. The So-Called Problem with Dividends Dividends are the most explicitly hated thing in business school. Since dividends are taxed twice, once as corporate profits and again at the level of the shareholder who receives them, students learn that paying dividends should be the last resort of any company. Students are taught that it is better for the company to find (profitable) projects to invest in, to buy other companies (mergers and acquisitions), and to buy back its own stock. All fine ideas in the academic world, but let’s look at what happens in the real world. The most popular thing for a company to do with excess cash is to buy back its own stock. This is frequently touted as “just as good as a dividend” or better because you don’t have to pay tax on it. What could go wrong? Apparently, a lot. A June 2012 study by Credit Suisse analyzed the $2.7T
Read More »

  Green Mountain Coffee Roasters reported 64 cents per share in non GAAP earnings which beat analyst estimates by 16 cents. However, it appears that changes in inventory obsolescence may have contributed heavily to Green Mountain beating estimates. The FY2012 Q3 10-Q states on page 37 and 38: Gross profit for the 2012 YTD period was $953.0 million, or 32.7% of net sales, as compared to $650.5 million, or 33.5% of net sales, in the prior year period.  Gross margin declined approximately (i) 290 basis points due to under-utilization of our current manufacturing base as a result of lower than expected manufacturing through-put primarily due to lower K-Cup® pack demand and lower-than-planned production levels which increased average labor and overhead costs per K-Cup® pack, (ii) 140 basis points due to higher green coffee costs, and (iii) 100 basis points due to a higher write down of finished product and anticipated obsolescence of raw material inventory due to lower than anticipated sales of seasonal and certain coffee products. The decrease in gross margin was partially offset by (i) a 290 basis point increase due to net price realization primarily from price increases taken in fiscal 2011 to offset higher green coffee and other input costs that were experienced
Read More »

Dear Investors, Wall Street always seems eternally optimistic about even the dodgiest of companies. Here is chart from FactSet showing that at the beginning of this year only 5% of the stocks in the S&P 500 (INDEXSP:.INX) had a sell rating from analysts. Why is Wall Street research so positive? The usual answer given is that there is a huge conflict of interest between the research analysts and the investment banking arms of large financial institutions. When companies need access to the capital markets to issue stock or debt, or need “advice” and “expertise” about mergers and acquisitions, they turn to investment banks. In return for giving business to these banks, many companies want analysts to say positive things. It’s especially important if the company is issuing stock or selling debt. You need to hype up the investment so you have buyers. It’s hard to find buyers when an analyst in the research division is writing bad things about the company. Even if an analyst isn’t affiliated with a large investment bank, the analyst still needs access to company management to gather information for accurate quarterly earnings predictions. Here again, saying bad things about a company or saying investors should
Read More »

Is Student Transportation, Inc. Improperly Calculating EBITDA in Violation of SEC Regulation G? 10/15/12 Disclosure: You should do your own research and due diligence before making any investment decision with respect to any of the securities mentioned herein. As of the publication date one or more of the following: Strubel Investment Management, our clients, our employees, and/or funds we advise are short Student Transportation, Inc. (STB) and stand to realize significant gains in the event that the price of STB declines. Following the publication of this article we intend to continue transacting in STB and we may be long, short, or neutral any time after the date of publication. We undertake no obligation to update or supplement this article or disclose changes in our position in STB securities. Student Transportation Inc. (TSE:STB) (NASDAQ:STB) (“Student Transportation”) recently released their fiscal 2012 earnings. In a press release dated September 25, 2012, available here, the company included a calculation of EBITDA (earnings before interest, taxes, depreciation, and amortization) for their 2012 and 2011 fiscal years. Student Transportation’s calculation of EBITDA does not appear to comply with the definition of EBITDA given by the Securities and Exchange Commission (“SEC”) under Regulation G. For both 2012
Read More »

  Dividend stocks and dividend mutual funds are very popular right now among everyone else as well. After the tech bubble burst and the subprime crisis took a big chunk out of people’s portfolios, lots of investors were shell-shocked. Now all they want is nice steady, unspectacular gains. The siren song of the dividend stock is very alluring. The Coca-Cola Company (NYSE:KO) The Procter & Gamble Company (NYSE:PG), Wal-Mart Stores, Inc. (NYSE:WMT), Exxon Mobil Corporation (NYSE:XOM), You can sleep well with those companies in your portfolio. With bond yields at record lows investors are also looking for income. Many stocks have dividend yields greater than the yields on their bonds. You can hear the dividend stock whisper its seductive appeal: “I yield 3%, choose me.” And many advisors and investors do. Historically, buying high-yielding dividend stocks has been a great strategy. This study (the dividend studies begin on page 30) by Tweedy Browne shows how selecting high dividend stocks has handily outperformed the market in the past. You get even more outperformance (at least historically) from buying only the high dividend stocks that have low payout ratios. High dividend stocks have even been less volatile and fallen less during bear markets.
Read More »

Gladstone Commercial Corporation (NASDAQ:GOOD) (“Gladstone”) is a real estate investment trust (“REIT”) that owns triple net leased industrial, commercial, and retail properties. It trades on NASDAQ under the ticker symbol GOOD. I’m not sure how you turn GOOD into an acronym for Gladstone Commercial Corporation or otherwise massage the name to get GOOD out of it. The letter D does not appear anywhere in the last part of the name. STAG Industrial (“STAG”) is also a REIT that owns triple net leased industrial and commercial properties. It trades on NYSE under the ticker symbol STAG. The company is called STAG, the logo is a stag, and the ticker symbol is “STAG.” That makes sense to me. Gladstone Management (they manage multiple companies including Gladstone Commercial Corp.) has a website (http://www.gladstone.com). It has five pictures on the main page. Two are of the US Capitol Building; one is of the Lincoln Memorial; one is a close up of the statute of Abraham Lincoln; the last one is a stock photo of some people in a conference room (perhaps discussing why Gladstone is infatuated with the US Capitol Building and Abraham Lincoln?). Gladstone does not list what properties they own on their
Read More »

Disclosure: You should do your own research and due diligence before making any investment decision with respect to any of the securities mentioned herein. As of the publication date, one or more of the following: Strubel Investment Management, our clients, our employees, and/or funds we advise are shortGreen Mountain Coffee Roasters Inc. (NASDAQ:GMCR) and stand to realize significant gains in the event that the price of GMCR declines. Following the publication of this article, we intend to continue transacting in GMCR and we may be long, short, or neutral any time after the date of publication. We undertake no obligation to update or supplement this article or disclose changes in our position in GMCR securities. Nothing in the article should be construed as investment advice or an offer to buy or sell any security. I have written several articles questioning Green Mountain’s capital expenditures and future cap ex plans and asking if it might be overly aggressive in capitalizing its expenses. Green Mountain’s management and their cheerleaders maintain that the increasing inefficiency of manufacturing operations is nothing to worry about, and that the company is just ramping up capacity to meet future demand (despite management slashing sales forecasts). They also maintain that Green
Read More »

Disclosure: You should do your own research and due diligence before making any investment decision with respect to any of the securities mentioned herein. As of the publication date, one or more of the following: Strubel Investment Management, our clients, our employees, and/or funds we advise are short JCOM and stand to realize significant gains in the event that the price of JCOM declines. Following the publication of this article, we intend to continue transacting in JCOM and we may be long, short, or neutral any time after the date of publication. We undertake no obligation to update or supplement this article or disclose changes in our position in JCOM securities. Nothing in the article should be construed as investment advice or an offer to buy or sell any security. j2 Global, Inc.’s (JCOM) primary business is providing electronic fax services. which as you would expect is a dying business. The company has grown mainly through acquisitions. Indeed, over the last decade they have spent $347M of $715M in FCF on acquisitions. After reviewing the company’s investor presentations and reading through their 10-K’s something strange caught my eye. The company reports monthly churn rates of a little over 3% in
Read More »

  It is important for investors to pay attention to year-to-year changes in the language used throughout a company’s 10-K, as changes the company’s lawyers force it to insert can reveal vital clues about the company. Don’t take my word for it, Jim Chanos says it. Examining J2 Global Inc (NASDAQ:JCOM) ’s 10-Ks over the past few years shows an interesting history of changes to the Item 1A. Risk Factors section. The biggest change that caught my eye is the addition of a new risk factor for the 2006 10-K about customers disputing credit card charges. If we experience excessive fraudulent activity or cannot meet evolving credit card company merchant standards, we could incur substantial costs and lose the right to accept credit cards for payment and our subscriber base could decrease significantly. A significant number of our paid subscribers authorize us to bill their credit card accounts directly for all service fees charged by us. If people use our services using stolen credit cards, we could incur substantial third-party vendor costs for which we may not be reimbursed. We also incur losses from claims that the customer did not authorize the credit card transaction to purchase our service. If the numbers of
Read More »