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Private Equity Dry Powder Off by a Third, Distressed Debt Leads

Posted Feb 15th 2010 1:30PM by Tom Johansmeyer (RSS feed)
Filed under: Private Equity

The corner of the private equity sector focused on distressed investment opportunities has a considerable amount of cash on the sidelines. Distressed debt funds lead the private equity industry in terms of dry powder, followed by special situation and turnaround funds, according to alternative investment research firm Preqin.

Though global dry powder has fallen from its worldwide high of $59.9 billion in December 2007, its January 2010 level of $42.5 billion is still far above the $18.7 billion reached in December 2004. This does represent a decline of 29% from the 2007 peak, but the dry powder levels remain robust.

Continue reading Private Equity Dry Powder Off by a Third, Distressed Debt Leads

Telecom firm closes internal investigation but what next?

Posted Jan 30th 2008 4:35AM by Zack Miller (RSS feed)
Filed under: Bad News, Employees

It's great when companies take a deep, hard look at themselves in the mirror. Frequently, though, this doesn't happen until some large, negative event takes place and the company needs to react.

Comverse Technology, Inc. (OTC: CMVT) is one of these companies facing itself in the mirror. Essentially a holding company which includes one of the leading providers of value-added software and services to the telecom industry (read, voice mail and billing), a large stake in a leading surveillance technology firm, and a couple other stakes in related businesses, Comverse has had an ugly couple of years.

Its founder, Kobi Alexander, sits in Namibia avoiding extradition by US authorities. In an ultimate act of chutzpah, Alexander sued the firm this week about his severance.The stock languishes. There is certainly a lot of value here -- the question is whether the company will be able to extract the value.

Continue reading Telecom firm closes internal investigation but what next?

Hot Topic could be primed for a turnaround

Posted Jul 10th 2007 10:15AM by Eric Buscemi (RSS feed)
Filed under: Bargain Stocks

Hot Topic Inc (NASDAQ: HOTT), the specialty retailer that operates the Hot Topic and Torrid concepts, might be worth a look. The stock is way off from its $30 high and is now selling for $11, and its poor operating performance could be bottoming.

While same-store sales continued to slide in May, down 6.1%, margins for the retailer are beginning to improve. Also, SAC Capital has racked up 5.1% of Hot Topic stock, or 2.3 million shares up from the 245K shares it had disclosed at the end of the first quarter.

With bad inventory out the door and movies like the Transformers and a whole new generation of video game consoles and games coming to market, this trendy retailer stock could be ready for a nice turnaround.

Expedia: Buy! Buy! Buy!

Posted May 10th 2007 11:50AM by Eric Buscemi (RSS feed)
Filed under: Earnings Reports, Expedia Inc (EXPE), Bargain Stocks

Turnaround is here and it is time to jump into Expedia Inc's (NASDAQ: EXPE) stock. After hitting some serious growth problems, management changes and massive investment in new products and software infrastructure are finally leading to better revenue and earnings growth.
  • OBITA increased 18%
  • First quarter bookings hit the $5 billion mark, over $55 million every day
  • European leisure business grew over 30% with revenue hitting $1 billion
  • Free cash flow was $606 million and shares outstanding decreased by 11% during the past year due to big share buybacks
It appears many of the initiatives that have been put in place on now bearing fruit. I say, buy and hold this stock. Free cash flow should go through the roof the next few years as new deals with hotels and airlines take hold. Also, international business is getting stronger and stronger.

Once again, Barry Diller has made the correct adjustments with this business model being here to stay.

RadioShack: Even the seemingly doomed can bounce back

Posted Mar 25th 2007 10:40AM by Tom Taulli (RSS feed)
Filed under: Products and Services, Management, Wal-Mart (WMT), Marketing and Advertising, Target Corp. (TGT), Best Buy (BBY), , RadioShack Corp (RSH)

It's been a long time since I've been in RadioShack Corp. (NYSE:RSH) store. I'm not sure why'd I go there. And, I'm definitely not alone. There are too many alternatives, like Circuit City (NYSE:CC), Best Buy (NYSE:BBY), Target (NYSE:TGT) and Wal-Mart (NYSE:WMT).

But, even companies that have limited futures can still be good investments -- especially if the price is right.

In this week's Barron's [a subscription publication], there's an excellent take on this. Basically, RadioShack's CEO, Julian Day, is a realist. He doesn't have fantasies that the company is the next-big-thing. Instead, his strategy has been to restructure the company to make it into a sustainable business.

It's really about cutting, cutting, cutting. Why have lavish advertising campaigns? Why have tons of stores? Although, this is the easy stuff. To make the turnaround a true success, Day needs to come up with the right product mix.

Then again, with a much more solid income statement, he now has the luxury to rethink things.

So far, so good. And it also shows that even seemingly doomed companies do have a chance.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Time to build a position in Dell?

Posted Mar 2nd 2007 8:25AM by Eric Buscemi (RSS feed)
Filed under: Earnings Reports, Forecasts, Dell (DELL), Hewlett-Packard (HPQ), Bargain Stocks

Dell Inc (NASDAQ: DELL) most likely has a good six-to-nine months of work before management changes begin to show up in results.

Last night's earnings release, by Dell's standards, were simply awful:
  • Reported revenue declined 5%; when adjusting for an extra week in the previous year, however, revenue increased 3% -- still awful.
  • Operating margins are now down to 4.9% -- not good.
While Dell's results point to a growth company gone bad, there is some room for optimism. Gross margin came in at 16.9%, versus estimates at 16.5%. So the worst in gross margin performance might be behind the company. However, SG&A expenses were higher.

So why build a position in Dell? Hewlett Packard Company's (NYSE: HPQ) operating margin is 7.6%, margins that Dell used to hit. Also, Dell, in its peak years, would generate gross margins over 20%. Therefore, Dell, if it can get its house in order, could show some nice operating leverage.

Another potential positive is that at some point the industry will have a PC upgrade cycle. This could put some wind into Dell's sails. Don't throw Dell's stock out with the bath water. Chip away on market corrections. The stock, if a turnaround plan is well-executed, could hit $30 on signs of improving business and margin trends.

JetBlue catching up to airline industry -- a bad sign

Posted Feb 20th 2007 7:30AM by Eric Buscemi (RSS feed)
Filed under: Bad News

If you invest in turn around situations, you will have spent a lot of time focused on airline stocks during the last five years.

When interviewing airline executives, they universally say the same thing: the airline industry is different than other industries, as you grow there is point at which your costs substantially increase as a percent of sales. The old concept of economies of scale does not work the same way in the airline industry.

This appears to be happening at JetBlue Airways Corporation (NASDAQ: JBLU). When asking airline executives about JetBlue as a competitor, many said that at some point its costs are going to have to go up.

The JetBlue irony is that the start-up airline is having trouble when legacy airlines are actually raising prices. There is no price war going on.

What are the reasons cited for JetBlue's blues? Regulation, as pilots need to follow federally established rest rules; poor communications -- a big expense; failed reservation systems -- very expensive; employees are in locations where they are unable to provide a helping hand -- more expenses.

JetBlue appears to have reached a size where it needs massive infrastructure investment. It will be interesting to hear if management comes clean on how much all the investments will cost.

The airline had scheduled 600 flights for Presidents Day, more than the 550 to 575 flights on a typical Monday. So far, 139 flights have been canceled.

Cramer's retail turnaround names

Posted Jan 10th 2007 6:16PM by Jon Ogg (RSS feed)
Filed under: After the Bell, Analyst Reports

On tonight's MAD MONEY show on CNBC, Jim Cramer discussed two retail turnarounds that are begging to be exploited.

Cramer likes Saks (NYSE:SKS) as the first pick. He thinks that once retailers tank, they stay down and dormant. He thinks the first pick won't even be public in a year, but if so he thinks it goes higher. SKS ran 3.5% to $18.30 after-hours, and the 52-week range is $14.10 to $21.45.

Cramer's second pick is Petsmart (NASDAQ:PETM). The turnaround is going well and fueled by better margins and merchandising. PETM just jumped 3.25% to $31.20 on Cramer's comments and he thinks it goes to $40. Its 52-week trading range is $22.07 to $31.38. Here are the full list of comments on Cramer's heavy petting.

Jon C. Ogg

Symbol Lookup
IndexesChangePrice
DJIA-89.2312,801.23
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S&P 500-9.311,342.64

Last updated: February 11, 2012: 03:07 PM

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