Kinnaras Capital Blog

On June 18th, The Wall Street Journal's ("WSJ") Daniel Henninger wrote an article entitled "'Public Option': Son of Medicaid" which either ignorantly or intentionally compared the public option for US health care against Medicaid.  This comparison is disingenuous and is hardly a fair comparison to any model public plan given a number of specific aspects of Medicaid that would not be attributable to a broader public health option.  Nonetheless, the WSJ's main purpose in the context of the health care discussion has generally been to preserve the profit margins of the bloated and inefficient private insurance industry at the expense of hard working Americans.  The main way it seeks to do this is to distort and present a dishonest comparison which allows Henninger to drive support against a public option for health care. Continue reading "Adding Honesty to WSJ's Henninger's Pathetic "Public Option""

In recent month Pershing Square founder Bill Ackman has been increasing pressure on Target Corp. ("TGT" or the "Company"), attempting to supplant certain Board members.  TGT investors have likely been following the situation very closely given that shares of TGT have struggled since 2007 but before electing Ackman and his suggested members, investors should take a closer look at what Ackman originally proposed before blindly electing his slate due to frustration with TGT's share price. Continue reading "Target Investors Should Review Ackman's Target Track Record"

The past eighteen months were difficult for many investors and fund managers across a variety of strategies.  The credit crisis resulted in major market stress that yielded correlations of nearly one across equities such that performance was largely dictated by the net long exposure of investors.  Nearly halfway through 2009, investors seem willing to view 2008 as a “six sigma” year and probably have little interest in attempting to learn much from it.  While in many cases, all investors can do is throw their hands up in exasperation, the past 18 months have provided some interesting lessons to those in value investing circles. Continue reading "Value Investing's Comeuppance"

In early 2008 Dough Kass of Seabreeze Partners and TheStreet.com issued a sell short thesis on Berkshire Hathaway ("BRK") which outlined some of his views as to why BRK was an attractive short candidate.  Recently, Kass has come out with some updates on his BRK short with some rather sensationalized titles such as "Is This the End of Warren Buffett?"  Titles like that can certainly generate web traffic but doesn't change the fact that this sell short call - in the context of the current market - is based on a very weak thesis. Continue reading "Kass Shorts Berkshire: So What?"

Broad macro pressures have finally caught up to Jarden Corp. ("JAH" or the "Company") in recent months and that combination along with a considerable debt load is presenting a rather toxic atmosphere for the Company, its investors, and its lenders in 2009.  While various risk aspects of JAH have been covered in previous posts, there are two items that should be considered ahead of its Q4 08 earnings release - JAH's credit rating and the value of its Goodwill and Intangible Assets. Continue reading "Jarden's 2008 Year End: Questions to Consider"

I had initially put together a small overview on my outlook for 2009 at the invitation of Seeking Alpha.  After being away for a few weeks I found a few emails from readers asking for a little more on some broader themes and I decided to put together a more "formal" write up, trying to provide a bit more behind my views on a strengthening USD and the state of the financial markets.  Also, given Caterpillar's recent earnings, I thought it would make sense to further emphasize the risk facing the industrial segment due to production overcapacity and declining capacity utilization.  Anyone interested can click here for my formal write-up.

The economic malaise is likely to persist through 2009 and the length of the downturn which started in December 2007 could last for much longer than the majority of economists expect. Nonetheless, 2009 might witness specific divergences in the performance of individual equities relative to 2008 that could allow for meaningful returns. For example, in 2008 correlations across equities increased, meaning that, with the exception of a few companies, irrespective of what one owned portfolio values generally declined. This meant that a large contributor to 2008 performance was the level of short exposure in one’s portfolio. As I’ve told some colleagues, in 2008 one could short anything and look like a genius.  This may change in 2009 and investors that can do substantial work at the company-level could be positioned to benefit by implementing long/short strategies.

Continue reading "Investment Themes for 2009"

On December 11, 2008, Gildan Activewear ("GIL") released earnings that disappointed investors.  In sympathy, Hanesbrands Inc. ("HBI" or the "Company") experienced a significant sell-off.  GIL dropped roughly 35% that day from its December 10 close of $14.17 to $9.19 while HBI dropped 24% from its December 10 close of $14.17 to $11.01.  On December 12, HBI fell a further 7% compared to a 4% decline with GIL.  While HBI has generally recovered from GIL's earnings disappointment, the Street has failed to distinguish the different end markets HBI and GIL serve.  In addition, HBI had been highlighted as an attractive short-sell recommendation by an independent research firm earlier in the year that has resulted in steady selling pressure for the last half of 2008.  The reality is that HBI's end markets are quite different from HBI and the short-sell thesis can be refuted by those that do their own work. Continue reading "Hanesbrands Unfairly Punished by Gildan Activewear's Results"

Last week, Jarden Corp. ("JAH") issued a press release indicating that its Q4 08 sales would be roughly $1.3B compared to analyst estimates of $1.5B.  While sales for Q4 08 will be well below Street estimates, the Company did not reveal any margin information and also indicated that JAH 2009 revenues would be $5B or 8% below Street estimates of $5.4B.  JAH also expects 2009 cash flow less capital expenditures will be $250MM.  Moody's Investors Services quickly followed up by issuing a negative outlook on the Company.  While it has taken far longer than anticipated, it appears that the Street may slowly be coming around to understanding the risks facing JAH. Continue reading "Q4 Warning and Moody's Support Jarden Short Thesis"

I've received a few emails regarding my short position on Jarden Corp. ("JAH" or the "Company") given the market malaise which has taken all stocks down.  Most of the emails, irrespective of whether the person was an investor, a short seller, of just observer of JAH, were curious whether I was still short the Company.  The short answer is "yes" and given JAH's latest Shareholder Rights/Poison Pill announced on November 20th, I thought it might be a good time to provide an update.  The Shareholder Rights plan was adopted because JAH's Board wanted to protect investors from opportunistic investors or buyers given the current share price.  I can understand management wanting to seek maximum value for its company but I found the notion of JAH being attractive to any strategic buyer at even the current price laughable considering JAH's weak balance sheet in the current macro environment and the lack of any real assets other than intangible brand names and goodwill.

Continue reading "Revisiting Jarden Corp."