CALPNIE :(

On 11.20 I was unpleasantly surprised by a valuation analysis conducted by Miller Buckfire (??) revaluing the current equity from between a whopping $0.00 to $0.43 from a current price ~$1.00. I took a beating needless to say. A few days later the equity comittee released their own analysis from Perella Weinberg (??) valuing the equity anywhere from $8.00 to $11.00!!!

Ok so someone is smoking something here. Looking through the reports its easy to find how these two companies can have such significant differences. The bullish report utilized an EBITDAR multiple of 12 - 13 and a discount rate of 8% whereas the bearish forecast utilized 8.5 - 9.5 and a discount rate 9 - 9.5. Not to mention there was a discrepancy between the number of shares outstanding too!! DCF analysis solely relies on your assumptions so this is really a 'he said/she said' kind of story which will ultimately be determined by a bankruptcy judge. I really really dislike taking headline risk....

Thanksgiving

Marty Zweig did some research on the days leading up to holiday's. He found that there is positive bias going into the day before Thanksgiving and the day after.

Great Article


12th grade education, no experience, awesome returns, deep value.

http://www.canadianbusiness.com/my_money/investing/mutual_funds/article.jsp?content=20060228_111027_964

CPHI Update

Haven't seen much in the micro-cap space but here's an earnings update on CPHI:

Rev up 65%
Net Income up 80%
EPS up 69%

Looks like great growth here, will dig deeper into the numbers....

Update 2:

Trailing 12 months EPS = 0.34
15x = $5.10
Good Margin of Safety and high growth - I buy.

Merge Arb - CKXE

Normally merger arbitrage is a dirty word. I stay FAR away from deals, basically its all about event risk, you have absolutely NO idea what can happen during the course of a deal and I think in most cases your not properly compensated for the risk your taking.

However this is a particularly interesting deal I'm involved with I will fill you in my thorough and detailed writing style (sarcasm):

CKXE = 12.40
Deal is $13.75 cash by management. Management owns 50%+ of the stock, non regulated industry.
PLUS 2 for 10 shares of FX Luxury (new issue)
MINUS an adjustment for the FXRE price

Here's a summary of the pricing:
The following chart illustrates the total consideration that each CKX stockholder will have received following consummation of the merger transaction based on assumed trading prices of FX Real Estate and Entertainment Stock during the measurement period.

FXRE Stock Price during Adjustment Cash Received at Closing Total FXRE Stock Value Total Value Received
Measurement Period in Cash Consideration ($13.75 minus Adjustment Received per CKX share After Consummation
(7.5% of FXRE Stock Amount) (Two shares of FXRE of Merger
Price) stock for every ten shares (cash and liquid
of CKX stock owned) securities)
FXRE ADJUST CASH Tot Value
$5.00 $0.375 $13.375 $14.375
$10.00 $0.75 $13.00 $15.00
$15.00 $1.125 $12.625 $15.625
$20.00 $1.50 $12.25 $16,25
$25.00 $1.875 $11.875 $16.875
$30.00 $2.00 $11.75 $17.75
$35.00 $2.00 $11.75 $18.75

Sorry for the formating!! Press Release -

CKX (CKXE) , the owner of Graceland and "American Idol," plans to be taken private by a group led by its CEO.
The company said Friday that it will be acquired for $13.75 a share in cash, a 29% premium to the stock's close Thursday. Shareholders also will receive stakes in FX Luxury Realty, an affiliate of CEO Robert F.X. Sillerman that will have intellectual-property rights to CKX's Elvis Presley and Muhammad Ali branded projects.
The deal will be effected through a merger with 19X, a private company owned by Sillerman and CKX director Simon Fuller. Fuller is CEO of the company's 19 Entertainment unit, which licenses "American Idol."
Shares of CKX were surging $3.95, or 37%, to $14.58, well above the cash portion of the deal. CKX has a 45-day window to solicit competing proposals.
As part of the transaction, CKX acquired 50% of FX Luxury Realty for $100 million in cash. FX Luxury also received the license rights to use the Elvis Presley and Muhammad Ali names to develop real estate and attraction-based projects such as themed hotels and casinos.
"We have come to realize that there is a substantial opportunity to capitalize on the Elvis Presley and Muhammad Ali assets in real estate and location-based attractions," said Sillerman in a statement. "However, the pursuit of these opportunities would require a significant investment of capital, which could hinder our ability to grow the core area of our business and which is not consistent with the business plan that we have always described to our stockholders.
"As a result, we thought it best to provide our stockholders a capital realization opportunity as well as the opportunity to participate in a new public company that will develop real estate and location-based projects that exploit CKX's iconic intellectual property content," he said.
FX Luxury Realty currently owns 50% of about 18 acres of land on the Las Vegas Strip, and it has agreed to buy the remaining portion for $180 million. It plans to use this land to develop a casino and hotel project.
FX also owns 13% of Las Vegas casino owner Rivera Holdings (RIV) , and it recently made a buyout offer to that company.

David Einhorn

David Einhorn was rejected from every PHd program he applied to so he took a million dollars and started his own hedge fund when he was 27. Now it's a multi-billion dollar fund with amazing stats. Posted is a transcript of a recent speech:


http://nakedshorts.typepad.com/nakedshorts/files/EinhornOnCredit.pdf

Update to XLE/CRUDE OIL SPREAD


The spread is at a much more attractive level now.

From Ticker Sense:

Taking Off the Collar (and the leash)

Our apologies for not listing this post yesterday, as many of you know earnings season is a busy and exciting time in the research industry. As some of our readers may have noticed, the weekend edition of the Wall Street Journal ran a small and under-emphasized (we think) article saying that the New York Stock Exchange has filed to end its trading collars. These collars were put into effect after the '87 crash, and are activated by 2% moves in the NYSE Composite Index. Their purpose is to control the impact of computerized trading programs that invest across the index.

In a move that is meant to help NYSE listed stocks compete more with other less restricted exchanges, the New York Stock Exchange might be removing some of its prestige and security. The trading floor is all but dead, and without collars to calm uncertain markets, risk increases. As Birinyi Associates has pointed out in numerous reports and articles this year, computers are now operating on both sides of many trades. As highlighted in topical study #36, The Next Crash, many erroneous trades are now busted (or forgiven and taken away), but the trades occur nonetheless.

If the trading collars are removed, the only broad market controls left are the circuit breakers. They are triggered by 10%, 20%, and 30% declines in the Dow Jones Industrial Average. A primary concern is that the Dow comprises only 2% of all stocks listed on the NYSE. An equally disturbing concern is the seemingly forgotten Dow move on February 27th, of this year. February 27th was the day that trading overloaded the computer system used to calculate average, and stocks were actually trading significantly lower than indicated by the Dow (chart below).



A third concern is that currently a 10% move in the Dow is 1,387 points. If an investor owned 100 shares of each Dow stock, a $169,847 portfolio as of 10/26, and they all declined by 10% (thus also causing a 10% decline in the DJIA) that person would lose $17,094. These figures are only as of the first circuit breaker.