Episode 0025: Central Garden & Pet: Untangling the competitive landscape

Central Garden & Pet contains numerous distinct businesses within its two namesake segments.  In part 3 of this podcast, we spend nearly two hours breaking down the pieces within these segments, and provide granularity so you can appreciate how various rivals compete in each niche.  Along the way, we explode the myth that dog food market, in which Central doesn’t have much of a presence, has unappetizing growth and profitability.  “Big dog food” is also the principal actor in the treat sector, but still Central has innovated and enjoyed success in treats and inedibles.  In Garden, we devote much time to describe controls and grass seed.  Part 3 also devotes much of its discussion to special ingredients, which mostly pertain to the flea and tick area.

Central Garden & Pet – Part 2: More on animal health, garden controls…

In Part 2 of the Central Garden & Pet podcast, we continue to review the operations of the company beginning with portions of the Pet segment, mainly Aquatics, Flea & Tick products, calming products, equine, and the professional and special ingredients businesses.  We discuss the Garden segment, especially controls.  Given some of the pieces of the Garden segment seem to have good profit margins, we explore why the other portions of this segment have thin margins, and what actions incoming CEO George Roeth might take to improve the situation.

SID 0023 Central Garden & Pet – Part 1

In Part 1 of this three-part podcast, we start by presenting some background on Central Garden & Pet, and we discuss management changes over the last few years that have affected the company’s strategy.  We draw comparisons in our analysis to other consumer product firms, and discuss management’s ability to achieve acceptable levels of ROI in its two segments.  After this high-level discussion, we take a detailed tour of many of the businesses in its Pet segment, which depending upon the variation of earnings in the problematic Garden segment, we think generally contain about two-thirds of the earnings power of the company.  GARP Research, which is the producer of Stocks-in-Depth, recently published an over 50-page long initiation report on Central Garden & Pet.  In the following two episodes of Stocks in Depth, we will resume with the Aquatics portion within the Pet segment, cover the Garden segment, and then in Part 3 we will devote considerable time to imparting some of our analysis of the competitive dynamics and market sizes for the plethora of businesses in the Pet and Garden segments.

Episode 0022: Columbia Sportswear (COLM): A leading global brand thrives as retail distribution channels change

In this podcast, we examine what has caused growth in outerwear, sportswear, and footwear to accelerate since the 2008 credit crisis for key players such as Columbia, North Face, and other brands.  These leading firms have  harnessed the opportunity to use outlet stores and e-commerce to redefine their relationship with their customers and retailers, and in so doing have increased their penetration of these essential apparel markets.  Coming out of the 2008 meltdown, we recount the grotesquely massive bets made by retailers on private label, which helped spur Columbia to develop this strategy.  We evaluate the return on capital of various players, taking a dive into the metrics of retailing to help contrast various approaches, and we touch upon the emergent category of yoga attire.  The industry has been changed on a deeply fundamental level, which we think has benefited the strongest brands over peripheral players, a trend that has had a profound impact upon other industries we have followed in the past, such as the travel market.

Episode 0021 Power Integrations – Part 2: Who can provide rapid charging solutions for mobile phones?

In Part 1 of our podcast analysis of Power Integrations’ stock, we laid out how we saw it fitting into stock market trends we’ve seen in 2016, which have been changing from the pattern followed since the credit crisis of 2008-2009.  This company has suffered from stagnant sales and compressed margins.  However, our methodology is to consider long-term trends and corporate milestones, and we think Power Integrations is beginning another such cycle, even if such episodes have in the past not been extremely robust ever since the company made a splash after its IPO in the late 1990s.

We believe InnoSwitch is the company’s first major technological advance since 2008-2009, when it introduced LinkSwitch2.  In Part 2 of this podcast, we describe the strategic aspects of how the other major rapid charging competitor has entered the rapid charging market, and why Power Integrations may have taken the high ground in this intriguing opportunity to make external chargers possibly demanded by the roughly 1.2 billion smart phones being sold annually around the world.  We compare its plight Synaptics, and encourage listeners to also review our stock research podcast of that company.  Synaptics has been a supplier of biometrics and touchscreen integrated circuits to Samsung.

Episode 0020: Power Integrations – Part 1: How Significant is InnoSwitch?

The last major milestone for Power Integrations was its release of LinkSwitch2 in late 2008 to early 2009.  LinkSwitch, by our estimate, is the company’s leading product family.  However, management stopped reporting sales by product about five years ago.  In this stock research podcast, GARP discusses a wide range of subjects pertaining to this niche semiconductor enterprise.  We aim to demystify the engineering breakthroughs it has achieved, including its latest, InnoSwitch, which is beginning to gain acceptance for what we believe will be the leading rapid charging standard, QC 3.0.

Episode 0019: RealPage (RP): Organic growth in cloud software for apartment management?

How much organic growth is really occurring at RealPage?  Is the apartment rental market going to become swamped by capacity?  How profitable is RealPage really, considering that it discusses its results with institutional holders in non-GAAP terms?  What does it look like using more conventional yardsticks?  Is there a large market waiting for it and Yardi Systems to penetrate?  In this podcast of this lesser known stock market listing, GARP Research attempts to unpack these questions through walking listeners through our granular models of the company’s operating results.

Episode 0018: Vocera Communications: How are communications affecting hospital clinical systems?

Vocera Communications is dearly valued relative to its present level of sales and red ink has been flowing for several years.  However, 2015 has been a transformational year.  Sales have started to grow and the losses are attenuating.  A few years back it was largely dependent upon communications “badges” largely worn by nurses in hospitals, and it was challenged by new text messaging technologies.  With a fair amount of development spending and some well-conceived, financially reasonable acquisitions, we think recent quarters indicate it seems to be gaining traction on an enterprise level.  How is this affecting clinical systems, and is it improving patient care and streamlining workflow?

SID 0017 Taser International – Part 2: Does Taser have a strategic advantage?

Shares of Taser International (TASR) retreated dramatically ever since the riots in Ferguson, MO dominated the headlines in early 2015, about one year ago.  Is the decline because of fundamental factors such as Motorola’s decision to enter the body cam and evidence management business, or is it more from the passage of an unpleasant psychological milestone in race relations?  Are international cities rethinking their need for conductive electric weapons or body cameras in the wake of the European Union’s 911 moment in Paris last November?

Episode 0016: Taser international – Part 1: Is Taser a classic hidden value and also an explosive growth stock?

In part 1 of our discussion of Taser International stock, we explore how there are two segments.  Its conductive electronic weapons (CEWs) enjoy extraordinarily high profitability with mid-30’s operating margins fully burdened, and competition barely exists.  The other segment is Axon, which contains its emerging evidence.com cloud-based evidence management system, which reduces paperwork for police officers, helps manage the multi-million dollar risks of large civil settlements, and organizes cases prosecutors advance to convict criminals.  Institutional managers of equities might pass over shares of Taser, because they appear expensive based upon the combined corporate earnings from both segments.  We believe such an approach is deficient, because profits in CEWs are undercut by losses in Axon, where the company is accommodating large trials with cities such as New York and London that might soon purchase a subscription to evidence.com.  In our opinion, Taser showcases how GARP Research has found interesting opportunities for its institutional equity research clientele through intensive fundamental research and deep understanding of how to analyse stocks through modelling financial statements and segment details.