Charlie Munger often repeats the old adage, “Show me where I’m going to die so I won’t go there.” His point, of course, is he feels articulating how not to do something is invaluable. He often credits all of his gains to merely not being stupid.
Today, Helios & Matheson (HMNY), owner of MoviePass is down another 30% - it feels like a mathematical marvel that a stock can have so many blood-curdling drops. This stock is down something like 98% in the past few months. It has over 3,000,000 subscribers, and LOSES money on every one of them. Their scheme is to somehow one day monetize all these subscribers, who gorge themselves on movies at HMNY’s expense. So, while the owners of HMNY pay themselves fortunes, shareholders have been obliterated.
The point here is I don’t think there’s a person in all of Fooldom more relentlessly focused on money - accelerating earnings, expanding margins, ability to protect the profits - than Saul. I see very little talk of leadership and a very small amount of talk about product quality, competition. And nothing about pie-in-the-sky fortunes to come. The money flooding through the door is what matters here. Period. At least that’s how I see it.
HMNY offers a great lesson in what happens to companies that lose money. In fact, it’s hard to dream up a better example of what this board doesn’t do. It was over $20 in October. It’s now worth around $0.30 per share.
BD,
who is trying to find the time to conduct his first Saulinian Analysis of Stitch Fix (SFIX), up 30% since killing it on earnings. I offer this half-arsed pitch to add some value to the board with a growth stock idea, or thoughts on one, in every post. I think SFIX is going to be a monster home run. My analysis is based on on leadership, business model, product quality and the insane-raves I’ve seen from some ladies in my life, “It’s like Christmas every month” declared one.
HMNY actually topped $30 at its peak…which was actually about the same time as Citron tweeted about it. This was one instance where Citron’s short thesis had validity (unlike with NVDA, SHOP, UBNT, HUBS, SQ & a number of others that don’t come to mind quite as quickly as those 5 that I continue to own). Just pointing that out to remind folks not to immediately dismiss something solely because of the source. In the case of Citron, it can be worthwhile to assess the actual argument. Citron can generate some awesome buying opportunities when their analyses are trash, of course.
trying to find the time to conduct his first Saulinian Analysis of Stitch Fix (SFIX), up 30% since killing it on earnings. I offer this half-arsed pitch to add some value to the board with a growth stock idea, or thoughts on one, in every post. I think SFIX is going to be a monster home run. My analysis is based on on leadership, business model, product quality and the insane-raves I’ve seen from some ladies in my life, “It’s like Christmas every month” declared one.
Ironically enough, towards the end of lunch today, I decided to start listening to the episode of “How I Built This” interviewing Katrina Lake (founder of Stitch Fix). Thinking about how little I venture to stores myself, I am coming more and more around to the idea of the Stitch Fix business model being far more viable than Blue Apron/Hello Fresh. One company that might be in a far different, but semi-related niche that might be worth comparing to Stitch Fix is Tom James clothing (https://www.tomjames.com/ ). Tom James is far more customized and likely much more expensive, with custom tailored items, but still might be worth comparing from a few different angles. Only reason I have any clue what Tom James is is because I used to know a girl who is a 2nd generation Tom James salesperson/consultant who has apparently been challenging a lot of her dad’s sales records.
volfan84
long the companies mentioned above (NVDA, SHOP, UBNT, HUBS, SQ)
No position in SFIX nor HMNY
Short ad hominem arguments (like in the case of Citron/Andrew Left, who I have grown to appreciate in a way)
I think someone mentioned SFIX a month or two back, maybe it was yourself broadwaydan?
Their CEO very charismatic and intelligent. Check.
Novel idea but little moat apart from providing quality/tailored clothing. I remember looking at it and then not liking the idea. If I lived in the states I would’ve subscribed and tried it out.
Two things stood out for me.
Katrina says they use data to tailor fashion advice to your personal tastes. Great, this can scale. But then they use actual real people to help further personalise clothing selection. To me, this here is a problem. You’re eating into your margins by using people, and you need good people to give good selections. When/if you scale, the standard is going to go down. If the standard goes down, your reputation takes a hit. You can’t afford that when it comes to fashion.
A lot of reviews I read, the customers felt they were getting bog-standard flavour of the week items. Didn’t feel personalised. A few mentioned competitors who were better. No idea on the validity of these, but it was enough to turn me off the company for the time being. No moat + competitors.
They need to partner with AYX - help out all their data scientists pick and choose different styles.
Having said all that, clearly they’re doing well. It’s run by women - most of the employees are women. They’ll probably end up in the fortune 500 in a couple years.
Citron was also dissing HUBS? I didn’t know that - I better go buy me some.
It was awhile back, way back in 2017 on December 5th, so definitely not still having any impact on the HUBS share price. It did cause a slight decline that day, to $75.75…the price right now, however, is above $140. http://discussion.fool.com/warning-hubs-targeted-by-andrew-left-…
Hi BD,
I have heard about SFIX from my 72 year old aunt, but didn’t think about it too much besides my wife might start spending money through them sometime in the near future. And as a stock I didn’t event think about it. My initial thought was that it is in consumer goods, and as has been mentioned before their revenue depends on a finicky population/reputation. Think Skechers.
I was totally expecting to go to SA and look at their finances and see huge growth from SGA and share dilution. Especially with 5k employees in the San Fran area. But I was really surprised, the numbers look great. The think to watch is margins though. I’m not sure how to value it either, based on earnings or sales?
Pros:
EV/S is 3.27 and P/S is 2.4
Enterprise value is greater than market cap. (I am not such an experienced investor to know what that means exactly, but I think it is being undervalued by the market, but that means the numbers are correctly valuing a tangible asset)
Gross Margins: 42% - this needs to be watched closely, and is it a Pro for its sector/industry since we are used to seeing 70%+?
Rev Growth: 26% eh, but growing (hopefully)
No debt! which is great for a consumer good
Management and social impact
SGA is reasonable and shares are being reduced not diluted (not sure about stock compensation)
Cons:
Earnings growth (but the financials are improving)
5k employees (seems like a lot compared to other companies I invest in)
Reputation is a huge risk
Need humans (currently) to sell product
End: If I was looking at investing for diversities sake, this might get a 1% position, but because I don’t need to be divers (my risk posture doesn’t warrant it) I will pass. Not a huge consumer goods investor (like biotech to me). But I’d be interested in seeing it brought back up again when others succeed.
I spoke to my niece, a passionate fan of the company, who talked about the radical improvement of the value of the boxes as her personal shopper, whom she called affectionately by her first name, got to know her. Also, as thousands of identical profiles pile up, they’ll surely be able to better serve future customers with less personal shopper intervention required. In my niece’s experience she was regularly keeping 5 out of 5 items per box. I think the human touch is not a hit to margins, but a key part of the reason there are any margins. And as future generations buy clothes, this may very well be the way they shop. Going to department stores is a royal pain in the bottom.
Also, I think there is a huge moat. Once you have invested the time to put in all your measurements and get to a know a human being, it will be extremely difficult for another company to come in steal your business. If SFIX handles there business correctly with young women (and hopefully men) they could help them not only build their first wardrobe, but build their kids’ wardrobes, both for life!
