Overstock.com

February 16, 2007 1:45pm by

I have, for the most part, avoided the Overstock.com controversy. Herb Greenberg and Jeff Matthews have done yeoman’s work  on this story over the years, and my input seemed uneccessary.

Now, with the SEC dropping their investigation of the "Sith Lords," and the company again  issuing disappointing sales and earnings, I have one simple question: Who owns this stock, and why?

Overstock shareholders must be 1st rate fools happy to own a 2nd rate internet retailer managed by a 3rd rate CEO whose 4th quarter numbers were awful (400-bps gross margin miss and a 100% negative variance on EPS?), and for the 5th consecutive Q missed the prior sunny forecasts we can expect to be missed for a 6th time in May.

Enough already!

There are 9,000 publicly traded companies out there; Why does anyone even bother with this POS?

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  1. dave commented on Feb 16

    maybe the guys chasing the $BKX and $RUT to all-time highs this week are looking for something with a bit less risk???

  2. vhehn commented on Feb 16

    Your fellow real money contributor Arne Alsin has 13% of his fund in OSTK. He sees something of value there.

  3. ryan commented on Feb 16

    I think you can make something like 15% just for loaning this out to the shorts. Still, not a risk that I’d take.

  4. Shrek commented on Feb 16

    There is a million other things the SEC could being doing than wasting time on this nonsense.

  5. angryinch commented on Feb 16

    Bought some long-dated calls when OSTK dumped back to 14 and change a few weeks ago. Up 20%+ on the play so far.

    The travails of OSTK are well-documented. The CEO is high comedy, as many have pointed out.

    Still, the company does $1B in online sales and was trading at 0.3x sales when I make my purchase. FWIW, Amazon trades at 1.55x sales.

    Can the news get any worse? Maybe, maybe not. Can the news get better (i.e., CEO leaves, operations improve, buyout, etc)? Without a doubt.

    At 0.3x sales, I’ll take my chances. Especially with 50% of the float still sold short. If they dump it back to 10, i’ll load up the wagon.

    Hate the company and the CEO, don’t even shop there. But starting to love the potential of the stock. Any positive news jams OSTK back up toward 25-30.

    Prefer to buy companies that are doing well. But take a look around the market. Most of the companies that are performing well have been bid up to nosebleed levels.

    I think Arne is right on this one. But it may take some time to play out. The first and best move would be to lose the CEO. But that might not happen right away.

  6. Jeff commented on Feb 16

    The real answer to this excellent question is very simple: they are Patrick, his family, his Dad’s insurance company, his Dad’s insurance friends, and Fairfax, a sort of Canadian Conseco.

  7. Steve commented on Feb 16

    Yes, Arne Alsin owns a ton of it. Check his website: http://www.theturnaroundfund.com/ He has underperformed the S&P since starting his fund 4 years ago. I used to subscribe to his newsletter on RealMoney. He owned Merck at $45 and said there was no way he’d sell it until it reached at least $60. He was big on Pier One at much higher prices. He bought Eastman Kodak three years ago at $26 and said it would be $45 by 2007. He recommended Blockbuster a few years ago. I don’t remember the exact price, but it was in the teens.
    To be honest, Arne’s performance is sobering. He’s a CPA who spends a long time making detailed studies of a company’s financials. In the case of Overstock, he met with numberous company executives. And he still underperforms the market. How can I hope to get it right?

  18. drsqueeze.com commented on Feb 16

    Arne is a case study in the dangers of thinking you’re smarter than the market.

    He should follow this Buffett advice from 1979:

    “Both our operating and investment experience cause us to conclude that “turnarounds” seldom turn, and that the same energies and talent are much better employed in a good business purchased at a fair price than in a poor business purchased at a bargain price.”

  19. toon commented on Feb 16

    Internet stock? Try TRFX.
    By the way we are still shorting GOOG, BBY, SBUX, DELL, AAPL, MSFT.
    Long TRFX!

  20. angryinch commented on Feb 16

    Funny you should mention Buffett. Along with Alsin, Warren bought a ton of Pier One too. Likely for the same reasons. But Warren has dumped his position. Don’t know if Arne still has his PIR position.

    You mention Arne bought EK. None other than golden boy Billy Miller has been averaging down on EK for years now. Hasn’t turned the corner yet.

    So Alsin isn’t the only one fishing for these fallen angels.

    I play the charts, nothing more. So I have no clue whether these turnarounds will ever turn around. My play on OSTK is just a trade, nothing more. It’s worked out nicely so far. I certainly don’t plan on averaging down on OSTK. Either it works, or i’m out. Maybe Buffett, Alsin and Miller can wait 10 years or more to get paid. Not me.

  21. Namazu commented on Feb 17

    angryinch has the ownership of the stock just about right. Add to his list people making quick trades like him and others covering outstanding calls–as well as some small-cap index funds and ETFs that are obliged to. The company has issued stock twice recently, at unfavorable prices and in contradiction to its stated liquidity needs. Its sales and margins are declining, although we’ve been promised improvement once the “over-overstock” is cleared out. The trajectory suggests that in 12-24 months, the company will cease to exist in its current form, perhaps at about half its size, with a stock in the single digits, and led by someone less “colorful.” In the meantime, enjoy the show!

  22. matt wilbert commented on Feb 17

    I thought about buying some OSTK, despite the various issues, because I can see how the company could be very profitable. It seems to me like a reasonable speculation. But I can’t get past what I regard as the quite odd and confidence-uninspiring behavior of the CEO.

    I will look at the company again if the management changes.

  23. joe commented on Feb 17

    Buffett didn’t buy Pier One, it was Lou Simpson who runs the $3B GEICO portfolio completely independent of Buffett.

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