I almost can’t even write about this one without laughing.
That headline is not made up, Robert Williams has a pitch out that compares his silly “open letter” to the head of the European Commission threatening an absurd “class action” suit to get rid of the Euro, to Gandhi’s letter shaming Hitler, Einstein’s letter to FDR about Hitler’s nuclear ambitions, and Thomas Paine’s “Give me liberty or give me death.”
OK, maybe not seriously — I assume that even a newsletter publisher couldn’t make such claims to a friend or colleague with a straight face, so hopefully he’s just allowing his copywriters to take leave of logic in their attempts to get your attention and urge you to sign up for his newsletter (this time he’s selling something I’ve not heard of before called Digital Fortunes, which is an “entry-level” letter at either $30/year or $149 a year, depending on where you look, edited by Louis Basenese).
But we’ll take them at their word and pretend that this is a real thing, at least for as long as it takes to figure out what the stock is that they’re teasing… yes, just like Gandhi and Einstein, Robert Williams is writing this letter to sell some subscriptions, and he’s using hints about a “secret” stock recommended by Basenese that will pop to get you to turn over your credit card number. (What, you don’t remember those newsletters of days gone by, Mahatma’s Hot Picks or Einstein’s Relative Value?)
So, as we shield our brains from logic and take the ad at face value, what’s the story? Why is Robert Williams writing this “notable” letter to the president of the European Commission, and threatening to sue?
Mostly, as I interpret the convoluted wrinkles of the pitch, because the euro is losing value versus the US dollar… and that means some stocks are not as valuable as he’d like them to be.
Here’s the intro to the ad, in case you haven’t had the pleasure of this particular giggle:
“The Letter That Killed Europe…Are you getting our free Daily Update
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“And the unlikely company now sitting on the doorstep of history….
“Albert Einstein sent a letter to President Franklin Roosevelt in August of 1939 warning him that Germany would soon develop a nuclear bomb.
‘A new phenomenon will lead to the construction of extremely powerful bombs. It could be achieved in the immediate future. This seems to call for quick action on the part of the White House.’ – Albert Einstein
“Had Germany been allowed to develop the bomb first, the Nazi flag could be flying all over the world.
“Einstein’s brief, poignant 502-word letter radically altered the course of history.
“Is it about to happen again?
“The letter below holds similar power…
“Love Him or Hate Him? The Letter’s Author…
“Robert Williams is a well-known advocate of Main Street investors….”
What credentials do they claim for Williams? That he predicted Uber would be successful, and he once predicted a Netflix stock split. And that his Wall Street Daily has 478,000-plus readers.
The implication, as I read it, is that this — once you add in the “historic” letter Williams sent to the EU — is enough to put him in the category of Gandhi, Paine and Einstein.
I’m not entirely sure I agree, but there you have it.
Here’s some more from the ad that gets into the actual stock he’s talking about:
“This time, Williams is fighting on behalf of his readers. According to Williams, a certain technology company should be trading 245% higher than where it presently is.
“U.S. government documents prove that the company is fundamentally sound, and poised to skyrocket based on its technological prowess and demand factors, which begs the question…
“If the company is so great, why are shares trading for roughly $10 instead of $36?
“Well, the problem traces back to the European Commission and the euro currency itself.
“In its complete mismanagement of the euro, policymakers – according to Williams’ research – have done serious damage to shareholders.”
Which, of course, smacks of nothing so much as a tantrum (I said it would be worth more, dammit, how is it that global macroeconomics could possibly make me wrong? I’m telling Mom!)
More from the ad:
“Invest Ahead of a Potential Shareholder Lawsuit…
“Williams believes the company’s tens of thousands of investors (his readers included) got a raw deal. They had the foresight to invest alongside a company ready to rank among technology’s elite, like Amazon and Google. Yet the euro crisis has temporarily derailed its efforts.”
And that letter…
“Williams sent an ‘open letter’ to the President of the European Commission, Jean-Claude Juncker. In his letter, Mr. Williams threatens to advise shareholders to sue the European Commission over the mishandling of its affairs.”
We won’t address the details of actual lawsuit threat, since I can’t maintain even a veneer of impartiality when talking about something so goofy, but I do want to find out what this stock is. Here are our clues from the “open letter” that Williams is sending or has sent:
“Dear President Jean-Claude Juncker,
“Your mishandling of European affairs has interrupted the historic rise of certain U.S. companies with operations in the eurozone.
“My interests concern the most dynamic of them, _______
“_______ trades on the NASDAQ under the ticker symbol _______
“Analysts (conservatively) peg fair value of the stock at $38/share.
“However, the spectacular collapse of the euro has squelched its ambitious growth.
“_______ recently suffered a $679-million reduction of its market capitalization.
“Euro-related weakness can be wholly blamed for the (temporary) decline in the company’s stock price, which presently trades for roughly $10/share.”
And the threat:
“Unless dissolution of the eurozone is undertaken by December 31, 2015, I will encourage a lawsuit on behalf of every _______ shareholder, which could hit your desk as early as January 4, 2016.
“Imagine the impact that a class-action lawsuit would have.
“Similar cases have settled for hundreds of millions of dollars.”
Stop laughing! OK, now some specifics about the stock:
“I’m writing on behalf of thousands of everyday people who had the incredible foresight to buy shares of _______.
“These folks would be enjoying millions in profits had it not been for the euro crisis. It was guaranteed to happen….
“The company in question, _______, remains perfectly positioned in the lucrative microchip industry.
“Its products serve exploding markets for a) wearable technologies, b) cloud computing, c) electric vehicles, d) driverless cars, e) solar panels, and f) smart meters.
“However, despite growing its profit margins across virtually every segment of business, _______ recently suffered a decrease in revenue.
“Since the decline was the direct consequence of euro-related weakness – not an underlying problem with its core business – a rebound in the stock price is highly likely.”
And then the examples of the impact the Euro’s decline had on this company’s results:
“The ‘Metal Oxide Semiconductor’ segment enjoyed robust growth, yet suffered negative euro effects of (-2.4%).
“The ‘Diodes’ segment enjoyed robust growth, yet suffered negative euro effects of (-5%).
“The ‘Optoelectronics’ segment enjoyed robust growth, yet suffered negative euro effects of (-7.7%).
“The ‘Resistors and Inductors’ segment enjoyed robust growth, yet suffered negative euro effects of (-8.2%).
“The ‘Capacitors’ segment did not expand, yet still suffered negative euro effects of (-7.6%).”
So what company are they talking about?
Thinkolator sez these hints all point to: Vishay Intertechnology (VSH) — though there’s room for a tiny bit of uncertainty in that, so we’ll say that I’m 98% sure this is a pitch for VSH.
Why the lack of 100% certainty? Well, VSH is listed on the NYSE, not the Nasdaq as teased. And the results, though those specific numbers are indeed from the company’s 10-Q, are stale — the currency impacts cited are from the first quarter, which ended on April 4, so they’ve reported two subsequent quarters. Still, those exact numbers bring a pretty compelling match between the company filings and the Basenese/Williams tease (-2.4% for foreign currency impact for MOSFETs, which is the acronym for metal–oxide–semiconductor field-effect transistors, -7.7% for optoelectronics, etc.), and Vishay is a US semiconductor company that has been hurt this year by the fall in the Euro.
And the stock did “suffer” a $679 drop in its market capitalization “recently” — though that all depends on the specific dates and what you mean by “recently,” of course. The market cap got as high as $2.4 billion last year, and dipped as low as $1.4 billion this year. It’s right around $1.7 billion now, with the share price around $11.50. If we assume that the WSD folks liked the stock back in May when the data in the tease was current, the stock is only about 10% below where it was when those first quarter results came out (that’s a recovery of sorts — it was down 25% or so for a while in September and October).
Of course, the argument that it’s all about currency impacts is specious at best — here’s a bit on that from Vishay’s 10-Q:
“Despite the negative foreign currency effect on revenues, we were able to maintain our profitability. Our percentage of euro-based sales approximates our percentage of euro-based expenses so the negative foreign currency impact on revenues was substantially offset by the positive impact on expenses. Despite revenues below our expected run-rate, our pre-tax results were as we would expect based on our business model.”
So yes, the “we’re going to start a class action suit against the European Commission” bit is absurd… but what about the potential for Vishay Intertechnology? T
hat you can guess at on your own — there will not be a successful class action suit against the European Commission to force the shares up by 250% or whatever the WSD folks are teasing, and it’s difficult to see a reason for the shares to be at $38 anytime soon… but that doesn’t mean it’s necessarily a terrible investment. Our goal, as always at Stock Gumshoe, is just to strip away some of the marketing hype so you can think about an investment on its own merits, without stars in your eyes about some theoretical (and highly unlikely) 200% gain in the next 27 days.
I have not done a deep dive into the numbers, but I checked their last decade or so on a few key metrics, and they look to be fairly ho-hum to me right now — annual revenue has ranged from about $2-3 billion, and right now the TTM revenue is about $2.4 billion; earnings per share has averaged about 70 cents each year for the past decade, and that’s where current trailing earnings stand; the share price has ranged from a couple dollars to $18 (and a tighter range of $8 to $18 over the last five years), and it’s in the lower part of that range now at $11.50.
That doesn’t mean the company has no chance of great growth from here, just that it’s been fairly moribund for a while. And analysts have low growth expectations, they see sales growth of only about 2% next year and earnings growth of about 11%, but they also anticipate that earnings per share will fall over the next five years.
So you can’t, at least, accuse Basenese and WSD of being bandwagon jumpers — if the Thinkolator is right and VSH is the stock they’re touting with the silly “class action” campaign, then they are at least being contrarian. The average analyst target is right around $11.25, about where the shares trade right now, and the average recommendation is “hold.” You almost never see companies with worse analyst expectations than that, not unless they’re at risk of bankruptcy or something — “sell” recommendations are still vanishingly rare on Wall Street.
I don’t mean to imply that Vishay is in trouble — they’re not, as far as I can tell, they have almost a billion dollars in cash (enough to offset their debt and pension liabilities and still have at least a couple hundred million left), and they have been consistently profitable except for this most recent weak quarter… they even pay a 2% dividend.
So… do you think they’re on to something at WSD, that growth in automotive, mobile device or other end markets will drive more revenue and earnings growth for Vishay than analysts are expecting? Have a better solution than the Thinkolator’s for this one? Any other thoughts to share with Gumshoe Nation? Let us know with a comment below.
P.S. There’s no sign yet that Robert Williams is planning to sue the Federal Reserve for slowing quantitative easing, possibly raising interest rates, and allowing the US dollar to stay strong, which hurts exporters. Stay tuned.
P.P.S. I desperately wanted to go on for several more pages about how crazy Robert Williams’ “open letter” reads, and poke more fun at it, but I resisted. You’re welcome.