魔球2.0 - The Rays' Way

魔球算是過去二十年在美國大聯盟最流行的經營概念，不僅僅對棒球界，也對企業經營帶來新的想法，不過在過去八年，有一個新的概念興起，就是The Ray's Way，中文還沒有名稱，就暫時稱做為"光芒道"，或是魔球2.0(不是野球太保那種)。

這個新概念，其實是由坦帕灣光芒隊所發展出來的，而這個啟源其實跟投資也有關係，因為這是由光芒的老闆與GM所推展，而這兩位人物，都是投資銀行出身的人，老闆Stuart Sternberg是高盛的合夥人，而GM是Andrew Friedman，做私募基金出身的。

金融業出身的人當大聯盟球隊的老闆不是頭一回發生，像紅襪的老闆John Henry是避險基金經理人，David Einhorn是紐約大都會的少數股東。而光芒隊之所以會這麼紅，是因為光芒隊創造了跟運動家隊同樣的魔球奇蹟。

熟悉美國大聯盟的球迷都知道運動家的魔球，就是以統計數據客服小市場球隊財力不足的難題，透過計量分析來創造球隊的長期競爭力，而運動家的魔球也推動了sabermetrics的興起。而光芒隊所做的其實也差不多，球團也運用了計量分析，不但如此，還有一個新概念，就是The Extra 2%的概念，他們認為，勝負基本上是50-50的機率，但如果你可以找方法多個2%，長期來說，你的結果就大大不同，其實這個觀念也跟價值投資的觀念差不多。

有興趣的人，可以去看The Extra 2%這本書(剛好台北市圖書館又有)，這是一本非常棒的書，有些價值投資人也推薦看這本書。內容介紹光芒隊在新管理階層接手後，在薪資有限的情況下，如何從一支萬年爛隊，變成過去五年平均勝場數91.6場的強隊。方式跟運動家隊差不多，就是依靠選秀，培養年輕球員，簽別的球隊所忽略的球員，以及利用新老闆在投資銀行的方法做球隊的交易。而除了提到提升球隊競爭力之外，還有提到如何讓球迷回到球場的過程。

而在最近運動畫刊，就有光芒隊的專題報導，裡面也有Extra 2%的觀念，例如一般觀念都認為第一個好球數要搶到，但光芒隊卻是以2好1壞來作為球數領先的條件，在去年他們在2好1壞出現的比例是大聯盟第一。

另外，還有介紹光芒隊培訓投手的方法，特別是他們培養投手的系統跟制度；熟悉棒球的人都知道，投手是棒球運動最重要的一環，在我過去看大聯盟的歷史，過去20多年只有多倫多藍鳥隊1992-93是靠打擊奪冠的，其它冠軍球隊的投手陣容都是當年度數一數二，不管是牛棚或是先發。

光芒隊的老闆體悟到這一點，但礙於球團Budget有限，無法簽下超級投手，所以他們就想辦法去培養自己的投手，最重要的是，他們在培養年輕投手不躁進。有些球隊為了戰績考量，常會把年輕有潛力的投手提前推上大聯盟，因而造成這些投手提早受傷，或是還不夠成熟，無法如預期的達到該有的潛力。但光芒隊不一樣，對於年輕投手，一進去先強化身體，手臂以及肩膀，並規定年輕投手一年只打一的層級，什麼球種不能投，像所有年輕投手一開始都不准投cutter，而投球局數跟投球數都逐步增加。

這樣做的目的，主要有兩個，一個是耐用度高，報導指出，在大聯盟要得到冠軍的一個指標，是隊中有四名投手上場先發30場以上，過去五的球季只有15支球隊達成過，其中12支球隊進季後賽，而過去五年的世界大賽冠軍，都有四名投手先發30場以上，而光芒隊也是其中一隊；其次是即戰力，光芒隊的投手不但耐用，且年輕，而且成熟度高，看一下他們去年先發投手的情況就知道。

	Age	W	ERA	GS	IP	H	SO	WHIP	SO/9	SO/BB
James Shields	30	15	3.52	33	227.2	208	223	1.168	8.8	3.84
David Price	26	20	2.56	31	211	173	205	1.1	8.7	3.47
Matt Moore	23	11	3.81	31	177.1	158	175	1.348	8.9	2.16
Jeremy Hellickson	25	10	3.1	31	177	163	124	1.254	6.3	2.1
Alex Cobb	24	11	4.03	23	136.1	130	106	1.247	7	2.65

我覺得光芒隊的成功，主要在於他們的觀念正確，管理階層知道自己沒有錢留下或簽下明星球員，能靠的就是年輕球員，所以他們最核心的理念，就是一定要培養一群年輕投手，可以不斷的補充投手的流失，而且這些年輕投手一上大聯盟，就一定要是即戰力，這種觀念造就了他們過去五年的成功。

光芒隊的成功，不是偶然，而是他們管理階層願意接受事實，但不是跟事實妥協，而是找方法取得競爭優勢，不斷的改善過程，專注於過程的完美，成功就是這樣來的。

張忠謀反指標效應

上一篇關於台股短期的看法，看起來是蠻幸運的，短線上台股真如預期反彈，可惜上禮拜五自己的操作出的太早，少賺了許多，但投資本來就是這樣，調適好心情就好，而且也只是短線的看法，最終還是要回歸趨勢。

禮拜五台股的強勢，主要是拜台積電所賜，難得一件的台積電漲停板，似乎為台股帶來一絲陽光，但背後卻可能烏雲罩頂，原因也是台積電，而且是我們的半導體教父。

如果有在follow張忠謀的人，大概會知道他所說的景氣方向，會跟股市是反方向，也就是反指標，而在東森57台之前也有談論過這個情況，我也觀察個幾次，的確是有這個狀況，但為了印證，這邊就想蒐集個資料庫，來作為比較正確的判讀，也可以拿來印證。

先說這次的結論，4/18那天，張忠謀說：最好的一年來臨，這是看多的觀點，以過去幾次的經驗，股市會有一個下跌的波段，所以，手中有部位的，應該要找時間點賣出了。接下來就看一下過去的記錄，這記錄可能不完全，時間也有限，未來會再陸續蒐集。

就過去四年的例子來看，張忠謀的言論對股市而言，等於是很有效的反指標，看多三次，三次中有兩次是往下，一次等於持平，而看空六次，股市只有一次往下走，其他都是往上，很有效。

不過還是要注意，資料數不多，還需要再補充多一點，所以未來會有新的update，這樣可以對張忠謀講的話做比較正確的判讀。但就目前來看，因為張忠謀而在禮拜五跳進去的人要小心，以他在上禮拜四的言論，我會選擇站在賣方。

當然這種指標不是只有張忠謀這樣，這邊也不是要貶低張忠謀，我非常尊敬張忠謀，他對台灣的貢獻絕對很多，沒有台積電，我想台股會更爛，而沒有人預測景氣是準的，郭台銘也有同樣狀況，去年七月Bill Gross說股市已死，結果美股創歷史新高，所以預測都是以不準居多，這次我們也可以看看張忠謀效應是否存在。

Coach (COH): A great business which you should look into

I am not a fashionable guy and never follow luxury brands. But I know Coach is an affordable brand. So when Coach's stock is suffering, it arose my attention.

Summary:
Coach (COH) is a fashion-goods company with a long history. In the past decade, COH increased its EPS 31% per year thanks to its presence in Asia. Even with this high growth rate, COH employed little capital and continues to return excess capital to shareholders. Its management is respectful and leads to the success in Asia. The company has suffered from economic headwinds in 2012 and emerging threat from Michael Kors, another fashion-goods company which offers the same products as Coach. Economy is improving this year and Michael Kors is not a threat which Coach is unable to handle. At current price, Mr. Market is thinking moderate to low growth for Coach and ignoring its expansion in Asia. 6% earnings yield and increasing payout will offer good return to shareholders.

Investment Rationale:

I think many people are familiar with Coach so I won't take too much space to talk its history and business. In a nutshell, Coach is an well-established brand. It has a long history, founded in 1941, and clearly a leader in handbags and fine accessories. Handbag is its major product, accounting for 65% of its net sales. But right now, it is transforming itself into a lifestyle brand, not just a handbag brand, by broadening its product offering into outerwear, shoes, jewelry, watches, eye wear, and fragrance. 

Coach is aggressively expanding into international markets. Coach is famous in Asia. Its international business grew from 9% of net sales in FY 2000 to 31% in FY 2012, a CAGR of 32.7%. Even in Japan, a country of lost decade, Coach is able to grow 32.7%. Coach is expanding fast in China, where its store number increases to 96 in FY 2012 from 5 in FY 2005. All these meet its strategic initiative, aggressively growing international business. Coach carries out a multichannel strategy, including retail stores, factory stores, wholesalers and internet. 89% of its net sales is from retail and factory stores.

Due to its international expansion, annual revenue growth over the past 10 years is around 20.8%. CAGR in the past five years is 12.8%, slowing but still quite high number considering the period includes the Great Recession. Thanks to China, Coach was able to make a small gain in 2009. 

Usually, high-growth companies require lots of capital and sacrifice their margin to fuel their growth. Coach's operating margin indeed is declining, from an pre-crisis average of 36.7% to an post-crisis average of 31.3%. But Coach requires little incremental capital. Its employed capital only increases by 18% in the past five years while its earnings is up by 56.5%. Its CAPEX need is low so Coach can retain a lot of cash flow. What Coach has earned has become its free cash flow. And Coach distributed these huge cash flow to its shareholders. 

	Net Income	FCF	DVD	Repurchase	Total Payout
2002	85.8	51.9	0.0	9.8	9.8
2003	146.6	164.5	0.0	49.9	49.9
2004	261.7	381.0	0.0	55.0	55.0
2005	388.7	221.3	0.0	265.0	265.0
2006	494.3	462.9	0.0	600.3	600.3
2007	663.7	638.4	0.0	150.0	150.0
2008	783.1	748.7	0.0	1,336.6	1,336.6
2009	623.4	568.9	0.0	453.8	453.8
2010	734.9	908.6	94.3	1,150.0	1,244.3
2011	880.8	885.6	178.1	1,098.0	1,276.1
2012	1,038.9	984.2	260.3	700.0	960.3
Total	6,101.9	6,016.0	532.7	5,868.4	6,401.1

In addition, Coach can turn over its cash very quickly. Though Coach's turnover of inventory is long, it essentially receives cash much faster than it pays. Furthermore, its turnover of inventory is getting faster.  Thus, with high margin, returning cash to shareholders and efficient asset turnover, Coach has been enjoyed high return on capital employed. Its ROCE is average 41% in the past 10 years and ROE is also 40% as Coach has a negligible amount of debt. 

	Receivable days	Inventory days	Payable days	Cash conversion cycle
2002	13.1	209.5	34.8	187.8
2003	12.7	208.2	38.9	182.0
2004	12.6	193.6	45.2	161.0
2005	12.9	184.5	58.5	138.9
2006	12.9	187.2	64.8	135.3
2007	13.4	188.3	67.9	133.8
2008	12.3	172.7	66.2	118.8
2009	12.2	156.2	55.3	113.1
2010	11.0	148.5	44.9	114.6
2011	11.1	141.9	40.5	112.4
2012	12.2	145.2	43.0	114.4

All these indicate that Coach has a moat and is a typical company favored by Warren Buffett, requiring little capital to grow its business. Its moat comes from its branding power, which attracts loyal customers. 

In addition to strong business, Coach has a stable and competitive management team. Its CEO, Lew Frankfort, is a veteran. He joined Coach in 1979 and was named Chairman and CEO in 1995. So Coach's international success is pretty much directed by Lew Frankfort. He was recognized as one of the 30 most respected CEO globally by Barron's from 2005-2008, and 2012.  Reed Krakoff is Coach's executive creative officer, an important position in a fashion company. He has served as the role since 1996 and worked for several design houses.

However, the stability of management may face challenge next year as Lew Frankfort will step down as CEO. He will remain the post of executive chairman. Fortunately, a seven-year veteran in Coach, Victor Luis, will become the next CEO. I believe that the company's strategy will not change dramatically under Luis as he is credited for international expansion for the past seven years. He led the success plan in Asian markets.  Nonetheless, the transition of CEO is still a risk to be taken into account.

With competitive business, strong brand and credible and stable leadership, Coach is definitely a great company. But the stock price has been declining since 1Q 2012, which may offer a good price for a great company. However, I still have to see what has happened in Coach and whether the problems are structural or temporary.

Its top-line growth reached peak in Q1 CY2012, and since then dropped from double digits to single digit in Q4 CY2012 at only 3.8%. 3.8% is the worst number since the Great Recession. The downtrend is primarily due to its declining comp. store sales growth in North America. In the latest quarter, Coach recorded a negative SSS growth of -2.2%. The sliding sales led to the anemic earnings growth, 4.2% and 5.4% in previous two quarters, respectively.

In the latest earnings call, the company blamed the disappointment for the macro headwind caused by fiscal cliff and Hurricane Sandy, and intensified competition in women's handbag. Is the company's reasoning justified?

Historically, fashionable companies can somehow defy economic headwind as they have brand power. Consumers interested in luxury goods are also more affluent. Comparing Coach's peer performance can tell us whether Coach is especially weak last year.  The selected peers are based on COH's proxy statement.

Comparable store sales YoY%

Apparently, COH's peers had been through some slowdown in the fourth quarter. A few companies recorded positive same store sales, like GPS, LTD. AEO and ANF saw sharp slowdown. But for high-end luxury brands, like TIF and GES, SSS was negative.  

However, we have seen an upstart, Michael Kors. And there's no secret that Michael Kors is seen as the biggest threat to Coach. Both companies offer nearly the same products. Prices are also alike. And right now, Michael Kors is gaining Coach's market. Women are talking about Michael Kors is selling the hottest handbags and Coach is losing its design edge.

Michael Kors is definitely the threat to Coach. But is it the threat that Coach can not deal with? I don't think so. Even if in North America, Coach is losing its customers to Michael Kors. I think this is normal for a emerging player in the market. And don't forget that Coach has also been hot before. With branding power, Coach has some customer base. Furthermore, Coach has a much higher brand awareness and footage in Asia. Coach is an established brand in Asia while Michael Kors is still in the early stage. Coach is still growing in emerging markets, where people's purchasing power is expected to grow further.

When I start to study COH, it traded at around 13x TTM EPS and 11.5x Fwd EPS. On 4/10, COH jumped 2.57% to 51.21, a fairly-valued price. This price is not depressed price. But you pay a fair price for a company with established brand, competitive management, friendly-to-shareholders policy, and expanding emerging-market business. This is not a bad deal and lower price will make me more excited to buy.

Disclosure: I am holding the long position of COH and will buy more if the price goes lower.

北韓與禽流感入侵台灣？

昨天台股重挫，雖然說是因為補跌，但補跌的跌幅似乎多了一點，感覺像是北韓進攻台灣，還有大陸禽流感傳到台灣，不過實際上如果真是如此，應該是每天都無量跌停。

但實際上，我實在是不懂為何台股要如此恐慌？而冷靜一點想，現在的下跌反而是短線做多的機會，或許禽流感是個不確定性，兩韓戰爭其實對股市是利多，怎麼說呢？

簡單說，就打與不打的問題，如果兩韓開打，以歷史經驗，凡是戰爭開打，股市往後都是往上居多，所以開打對股市是利多，如果不打，不用講，一定是利多。

而回歸到會不會打的問題，基本上，我是覺得不會打，因為北韓的既定模式就是這樣，吵一吵之後就沒事了，而畢竟新官上任三把火，為了鞏固政權，北韓新領袖想要大吵一下也是可想而知，但除非他是真的失心瘋，要不然真的打了，對他也只是兩敗俱傷，自己的政權也會沒有，看看伊拉克的例子就知道了，所以如果他老爸有提醒過他的話，他應該知道該放手的時候就要放手，但他是不是比他老爸還瘋狂，這就很難說了。

所以台股跌成這樣，實在是過度恐慌，沒有道理可言，不管怎樣都是利多，就算開打了，重創南韓經濟，而將南韓是為貿易與企業競爭對手的台灣，也是利多，怕被飛彈射到，看看日本比台灣更接近韓國，跌幅也沒那麼慘，所以，台股這樣慘，投資人應該趁機會去撿便宜，也可以買一下韓國的ETF。

不過這也不是說台股就一路長紅，只是屬於短線的看法，也順便紀錄一下，未來回頭再來檢討看對不對。

Shining STARZ (STRZA)

以後推薦美股，會以英文來寫，主要是希望有更多的人可以一起來討論，至於台灣的朋友，做美股的話，英文也應該看很多，我寫的英文也蠻台式，所以就從這一篇開始吧。

Today I will show a good value play, Starz (STRZA). 

Summary:
Starz is a provider of premium video programming, offering films and original programming. It has been owend by Liberty Media Corporation, John Malone's media investment holding company. LMC spun itself off and the parent becomes Starz. After spinoff, Starz becomes a small-cap company and institution investors may have to sell their shares due to their limitation of market capitalization size. Thus, Starz currently offers very attractive valuation, earnings yield of 9.4%, FCF yield of 10.4%, and EBIT/EV of 16%. And spin-offs can historically offer better return. Starz has stable and rising subscriber base. It is also equipped with strong balance sheet and cash flow. Though original production is still in infancy, its CEO, Chris Albrecht has a lot of successful experiences in original programming and HBO. John Malone's track records and potential M&A target are also a plus.


Investment Rationale:
Prior to 2013, Starz is owned by Liberty Media Corporation, whose chairman is the well-known media dealmaker, John Malone. Starz is not really being spun off, which is a tricky part. During August 2012, Liberty Media decided to spin off Liberty Spinco, whose major business is the Old Liberty Media not associated with Star LLC. So, in reality, the original parent company, Liberty Media Corporation, changed its name to Starz, and the new Liberty Media (LMCA) became another separate public company. This spin-off finished on January 11, 2013. 

To be honest, I don't know why Liberty Media spins itself off, not spin off Starz. Maybe it's about law or tax. So if anyone has any insight of this, I would very much like to hear.

Ok, this is the spin-off. Usually, spinoff creates a very good value play as institutional investors with market cap limit needs to sell the smaller spinoff. And more focused structure and strategies create higher value. But what about the company?

Starz is a provider of premium video programming. According to it 10K, Starz provides premium subscription video programming to U.S. MVPDs (Multichannel video programming distributor), including cable operators (such as Comcast and Time Warner Cable) , satellite television providers (such as DIRECTV and Dish Networks) and telecommunications companies (such as AT&T and Verizon). In addition to acquiring content from other media companies, Starz also produces its own original programming.

There are three business segments, Starz Networks, Starz Distribution, and Starz Animation. Starz Networks accounts for the largest proportion of business, 78% of sales in FY 2012. Starz Networks offers premium subscription video programming. Its generates revenue from distributors. People who subscribe Starz pay a fixed monthly fee to distributors, which then pay Starz based on the rate stipulated in the agreement. The agreements with distributors are generally multi-year ones and Starz can raise the rate based on  CPI. So its revenue is stable, visible, and immune to inflation. Starz Networks are commercial-free.

Starz Networks offer three channels: Starz, Encore and MoviePlex. Offered contents include recently released and library films, along with original series. Starz has exclusive long-term agreements for films theatrically released with Sony (through 2021) and Disney (through 2015). It also has long-term agreements for older films with other major studios. Its original series include Spartacus and The Boss. Target group is those aged 25-54 with income of 50,000+ annually. 

Starz's financial number is not fancy but stable. Top line grows only 3.6% annually from 2008 to 2012. But thanks to its stable programming costs, Starz is able to grow its operating income and bottom line. Its operating margin is quite satisfactory at around 25% for the past two years.

Number in thousands

Starz does not need a lot of capital to maintain its business as its programming and production can be paid by its operating activities. Basically, Starz is a cash cow. Its operating cash flow has exceeded net income. It has a debt of 540 million. Starz has a very good balance sheet. Based on its net income, it can pay off its debt within 2-3 years. Even if considering Starz still has to distribute a special dividend of 1.2 billion to New Liberty Media in 2013, Starz has sufficient ability to pay off this with its large cash of 749 million and ability to borrow. Furthermore, Starz has mentioned in its 10K that it intends to use its cash to buy back shares.  

Based on its current number of outstanding shares, 120.2 million, Starz's earnings per share is 2.1 and FCF per share 2.3. Hence, based on its current price, Starz has a earnings yield of 9.4% and FCF yield of 10.4%. Turning out, Starz traded at only 10.54 times its 2012 EPS. On the other hand, its EBIT is 405 million while its enterprise value is 2,450 million. Its EBIT/EV is 16%. With stable business, visible revenue stream, strong cash flow, I believe Starz can make a satisfactory return at this price.

After looking at its financial numbers, let's turn to its management. Starz is currently led by Chris Albrecht, well-known in media industry. Albrecht joined Starz in 2010. He was the former chairman and CEO of HBO and worked for over 20 years. He is the man who transformed HBO and television landscape. HBO used to focus on movies. During his tenure in HBO, he has created several successful original series, including "Sex and the City," "The Sopranos," "Six Feet Under," "Deadwood," "Band of Brothers," “Curb Your Enthusiasm” and "Entourage." He is credited for the rising HBO. Right now, under his leadership, Starz has also developed many original series and is following the path of HBO.

Since Starz is following HBO's path, how is Starz compared to its competitors? In addition to HBO, Starz also compete with Showtime, owned by CBS. All of them offer premium TV and have the same business model. Business of Showtime and Starz is only in United States. Only HBO is aggressively expanding into other markets. In US, Showtime has the most number of subscribers, 76 million, followed by Starz, 56 million. HBO has 41 million subscribers in US but 73 million in other countries. Showtime is the clear leader in premium subscription service while Starz is trying to catch up.

	2012	2011	2010	2009	2008
Starz	56.0	52.8	51.0	47.5	49.4
YoY	3.2	1.8	3.5	-1.9
HBO US	41.0	39.5	39.4	41.0	40.9
YoY	1.5	0.1	-1.6	0.1
Showtime	76.0	73.0	67.1	61.3	58.7
YoY	3.0	5.9	5.8	2.6

As for the contents, there is not too much difference in film offerings, I believe, as all three networks sign output agreement with major studios. However, only Starz has no sports and boxing events broadcasting. And Starz's original series are still in infancy. Looking at the following table for currently or previously running original series:

Starz is still weak on original production. There are no hits yet and the number of production is much smaller than HBO and Showtime. The number of average viewers of Spartacus, so far the most successful series produced by Starz, can not be compared to like Game of Thrones, True Blood, Homeland, etc. This is not to say, however, that Starz is unable to produce top series. It needs talents, time and experiences. And don't forget that Starz has Chris Albrecht. You can not rule out that Staz will produce a hit like Game of Thrones.

Turning to valuation, as HBO and Showtime are owned by media conglomerates, it is hard to compare them to Starz, the only independent premium program service. Compared to other cable networks is still useful. 

Clearly, Starz is cheap compared to Discovery, another John Malone's spinoff, and AMCX. Starz is even cheaper than the owners of HBO and Showtime. And it is reasonable to assume that HBO and Showtime should be traded at higher premium than their parents. Starz's business is not deteriorating and subscribers are increasing. Its balance sheet and cash flow are strong. This kind of valuation is attractive.  

Furthermore, as mentioned, Starz is the currently only independent premium programming service provider. It is a potential target for large media conglomerates which would like to take a slice in premium programming. And this may be the reason why John Malone makes this spinoff.

Risks are the unproven production capability and the loss of subscribers. Currently, Starz still has stable and rising subscriber bases as it offers a competitive price with Showtime. However, if Starz can not produce more top series, it still runs the risk of losing subscribers. But with  Chris Albrecht under the helm and the mild success of Spartacus, Starz should be able to gain more ground. And its price offers plenty margin of safety.

Disclosure: I hold the long position of STRZA.