Thursday, March 26, 2009

Dataram Still (Not) Delivering (To Shareholders)

In Dataram's most recent press release, the company more or less proclaims "HEY EVERYBODY!!! WE ARE STILL IN BUSINESS!" The release, ironically titled 'Dataram Still Delivering, Still Committed to Our Customers' outlines the great products that they make, but makes no mention of delivering value to shareholders. No surprise here, but I don't give a damn about the making the best products... I just want for the company to get an excellent return on my invested capital (which I don't feel the industry can do at present), give me my portion of the cash that my stock represents, or do a nice sized share repurchase to retire shares that represent more cash than they trade at.

It's too bad that the company is supplying a great product to a market that is already flooded with memory-crippling their profitability and edging cash flow in the red. It seems that the leadership of the company, being as option happy as they are, would support a modest share repurchase. Much to the chagrin of the owners of the company (people like me), our elected representatives don't seem to understand buying a dollar of cash by purchasing 70 cents (or so) in stock.

Meanwhile, I have still not heard back from the board of directors in regard to my last letter- No surprise there... Who would have thought that cigar butt stocks could be so odd? I guess that this is all OK since my original thesis was that that the stock is more or less a call option on the company's cash.

Wednesday, March 25, 2009

Value investing with the principles of an Austrian

Here is a great write up on how value investing matches up with Austrian School economics. I must say, it summed up a lot of 'thinkings' that I have had but not put in to writing.

There are some conclusions that are, in my opinion, incorrectly drawn (mainly surrounding Warren Buffett), but none the less, are interesting and quite informative to read.

Justifications for markets not being in equilibrium spoke to me the most.

Disclosure:I am sympathetic to the thinking of the Austrian School of Economics-big surprise there! ;-)

Another Union-esque Post

Here is a good example of what happens when mixed economies take over a country.

It's populism at it's finest.

Tuesday, March 24, 2009

A Slightly Different Way of Looking at Buying Stocks

When buying a stock, there are generally (in an all things equal sort of world) 2 schools of thought that people adhere to:

1) I am buying part of a company that is undervalued and is intrinsically worth more than what I am paying.
2) I am buying a piece of digital paper which I think someone will be willing to pay more for in the near future.

Obviously, I am in the camp of the former school. Don't worry, I won't delve in to how ridiculous the latter school is-there has already been too much written on that.

What I am going to write, is that when you buy a security, you are effectively saying that anyone who sells at the price you pay (or below, for that matter) is wrong... Think about it...

There are few things in the world where a person can implicitly say by their actions "I don't care what everyone else is doing... I see something that the whole world is missing out on. They are all wrong!" You and I do this on a daily basis whenever we buy and/or hold onto our securities.

This 'I am right' attitude is something that both traders of stock and investors in companies are alike in. Entrepreneurs are the same way; when they open a business, they are implying that they see a need for a service that no one else is passionate about/convinced of enough to actually do.

Really, it is pretty crazy if you think about it. I think that if more people realized what they were implying, when they were doing whatever it was that made them do the implying in the first place, then they would think about the courses of action they take a lot more carefully... Especially for people in the second school of thought that I mentioned; mainly, I would imagine there being a lot more interest in the reading annual reports.

Monday, March 23, 2009

A Good Anti-Coercion Post

Here is a good video about 'card check' unionization legislation... Kathy Gornick (speaking roughly 45 minutes in to the video) is a person that I am loosely associated with through the Bluegrass Institute for Public Policy Solutions and

Obviously, I think that people associating with who they want is A-OK. However, the idea that a simple majority can dictate what other workers do, especially through a non-secret ballot-seems pretty absurd.

On a personal note, I once had to deal with a union that didn't represent me, when I worked at Kroger (KR) a few years ago. When I came to Lexington for college, I broke union rules by asking to NOT take an unpaid lunch break; this was so I could stay on the clock longer and make more money. Had the union found out about this, problems could have arose. Ironically, when union members would sit in the break room for 1/2 an hour past their 15 minute break, nothing ever came up...

Maybe I am a bit jaded, but I think that unions generally detract from economic viability... Surely GM, Ford, and Chrysler only bolster my arguments.

Monday, March 9, 2009

2 Shares of Dry Clean USA

2 shares of Dry Clean USA traded hands today... As the result of $1.34 of stock being exchanged, over 10% of the company's 'market value' or almost $600,000 dollars of market capitalization instantly evaporated.

Stunning, simply stunning.

Disclosure: Long DCU and refusing to believe that 2 shares can assign a value to my holding!

Thursday, March 5, 2009

Someone Changed Jeffrey Macke's SHLD Article!

On February 27th, Jeffrey Macke of CNBC's Fast Money published an article on addressing Eddie Lampert's Chairman Letter to the shareholders of Sears Holdings Corporation. In the article Macke made a series of what we can only assume to be (mis)statements. Since the articles publication, I and others posted replies asking Macke to clarify and correct points he made... In addition, I wrote a blog post that was picked up by Seeking Alpha in regard to the inaccuracies. The main one in regard to Lampert being "A man who used his old firm, Goldman Sachs (GS) to plow $5 billion out of Sears and into his personal hedge fund".

Instead of Macke coming out and saying that he was wrong, he (or someone at Minyanville) simply edited the statements out of the article. Thankfully, Google was able to link me up with an archived version of the article on MSN Money Central so that I could make a 'compare and contrast" post. As this experience has shown, I am unable to rely on simply hyper linking to articles that contain information that is highly subject to change... as a result, I printed off both copies of the story, highlighted the changes, scanned, and put them in a picasa folder to keep/preserve them in the pristine digital clarity that they deserve!

The 'Edits' (click for the scanned copy):

#1) CHANGE of "CEO" to "Chairman" in reference to Eddie Lampert's role at SHLD.

#2) DELETION of "This is from a man who effectively cashed out to the tune of $5 billion dollars in January of 2007 with SHLD in the high 170s."

#3) DELETION of "For comparison's sake, in the time since Eddie’s cash out (he put the money in his hedge fund),"

#4) DELETION of "A man who used his old firm, Goldman Sachs (GS) to plow $5 billion out of Sears and into his personal hedge fund isn’t shameless. It’s utterly amoral. Mr. Lampert calls himself a "victim" in the document. The mind boggles at a man who would write such a thing to an audience of Sears holders."

Overall, I think it is awesome that the article was changed; I am guessing it was due to a host of angry emails, posts, articles and the like. It wouldn't be a total shock if Minyanville or Macke got a call from a representative of Lampert telling them to take the (mis)statements down... I am no expert, but it seems that a $5 billion dollar (mis)statement is a pretty big deal and on the verge of slanderous.

As a side note, I would say that my favorite rabble rousing comment was one posted by a guy with the screen name of "Sam C", who stated "Jeff, if you aren't short, you are either stupid or pimped out out by a short seller. Maybe your short seller buys your $5B fake rubber knee pads at kmart, and employs you to spend your time putting in a special order for knee pads with the teenagers at your local kmart after volleyball season is over. "

Classic, truly classic.

I am also planning on holding Macke to the bet that he threw out-"Sam C." and I both accepted: Macke buys dinner if SHLD doubles in price before it goes to the single digits. But don't get me wrong, as I have previously said- all things equal, I hope SHLD goes to $5 bucks a share and that I have to buy dinner... I will sell everything that I own to buy as much SHLD stock as I can (that not only includes my house, but also my SNS; which I deeply value holding on to. Like SHLD, I think is being hammered by short sellers).

The bottom line is that it is unavoidable to make some false statements. When things said that are attacking some one's character, significantly effect a person's investment decisions, or are published on a reputable subscription site (by a guy that is a commentator on CNBC none the less), they should be made with as much caution and verification as possible. As another side note, if anyone at Minyanville is reading this and thinks that they can somehow change either the MSN publication, how Google sees the article, or delete comments from the Minyanville page, don't bother... I have saved screen shots of all things related to this post and the articles.

As always: kind of in jest, kind of in principle...



Disclosure: Currently no position in SHLD, long SNS.

Sunday, March 1, 2009

My 2nd letter to Dataram (and their response to my first)

A few weeks ago, I was pleasantly surprised to open my mailbox, and see an envelope that had the Dataram logo printed in the return address area. Being initially shocked that the company had even responded to my letter asking for a share repurchase, I was not excited about the response:

Here is my response to their letter:

Members of the Board,

Thank you for your response to my letter regarding a share buyback; I sincerely appreciate John Freeman taking time to address my concerns about our company.

While I understand that the business is attempting to grow, please be mindful that ‘business growth’ alone does not necessarily increase shareholder value. As owners of Dataram, we should want for the company’s capital to appreciate at stupendous rates on a per share basis. As this is the case, pursuing sales growth or acquisitions without analyzing the cost of the capital that was used to facilitate said actions can be wealth and value destroying. This effect is only exacerbated when the company’s common stock is trading at roughly 2/3 of its cash less debt; indicating that either the stock is incredibly undervalued or the market as a whole has no faith in the presently charted course of growth through acquisition.

Prudent capital allocation is a goal in which I am sure that you and management are aware of, given the fiduciary duty to yourselves and all other owners of the company. While it is my hope that the ‘Try and Buy’ program is a great success, it is imperative to put the company’s cash to the most profitable use possible. Over the past year, we have seen our reserves of cash actually go down! On the face of things, shareholders would have been better off had the company invested all available capital in Treasury Notes and ceased to manufacture, market, and sell memory. A share repurchase at present valuation levels, provided that the shares are retired and not granted as options, would be a great way of unlocking value by increasing long term cash flow and earnings on a per share basis.

In addition to a share repurchase program, I ask the board to consider putting the company up for sale. If the company were sold as a whole at its current market valuation, the buying entity would have effectively been paid over $5 million dollars in cash to assume next to non-existent liabilities and all future cash flows of Dataram. When coupled with the patents, industry relationships, and reputation for quality that Dataram has developed over the years, Dataram is quite attractive to a host of companies who would be willing to pay a premium for the company.


-Jeffrey Moore

I suggest and hope that any interested parties also write the board in support of putting the company's cash to good use.

Obviously, I am long DRAM.