We look at $PLUG as an options on the modern fuel cell technology. Buying $PLUG buys you convexity on this market but the underlying payoff has also some convexity to the upside because of the impact of reflexivity (Soros) between the stock price and the business.

This situation has tremendous potential energy to the upside. Some will be disappointed that we are not pulling out a 180 pages Ackman presentation about this situation. Doing this would be intellectually dishonest. When dealing with the adjacent possible….We just don’t know.

But we know this about this situation. We know that in order to rocket launch and transform this potential energy into kinetic energy, we need an ignition, a catalyst. If Plug Power ignites, this situation will reverse the downward trend and start trending the other way in a massive way.

We believe the catalyst resides in having one of $PLUG top customers extend the GenDrive solution from location one to location two.  Here is what Plug CEO said during the latest earnings conference call:

We are also quite excited to announce that the Wal-Mart Washington Courthouse Ohio Distribution Center completed deployment of over 250 GenDrive units powering their forklift truck fleet and have removed their battery room. 3 or 4 of our largest customers discussing multiple distribution centers, up to 5 in some case, where they’re looking to migrate to fuel cells, where they’re working through their expansion plans internally. (Source www.seekingalpha.com)

We find it interesting that Wal-Mart($WMT) has eliminated its battery room. If this was an experiment, it would have most likely kept its battery room at this facility. Wal-Mart has 158 distribution centers in the USA. You do the math . If $WMT decides to implement the GenDrive solution to a second distribution center, Plug Power will have made a reality of the adjacent possible.

Makes sense right? But actually, WMT has implemented the technology in 3 distribution centers already. Check out this press release issued by Ballard Power System ($BLDP). Could it be that the market is not paying attention? What is the value of the Wal-Mart potential future business?

The pent-up customer demand is visible to the team at Plug Power. (PLUG CEO comments, transript www.seekingalpha.com)

No kidding!

But this is not only about $WMT, it also about Fedex ($FDX), Procter & Gamble ($PG), Sysco ($SYY), Coca-Cola ($KO), Mercedes Benz…..

Let us know what you think.

Disclaimer: Bigger Capital, LLC, Bigger Capital Fund, LP, Bachelier, LLC and the Bigger family are large holders of $PLUG stock.

Plug Power is a highly distressed situation and it is not suitable for the majority of investors. The likely outcome of an investment is a loss of principal.

Written by Michael Bigger. Follow me on Twitter and StockTwits.

The post Plug Power Ignition appeared first on This is Bigger.

Plug Power is an architect of modern fuel cell technology. Plug Power is revolutionizing the industry with cost-effective power solutions that increase productivity, lower operating costs and reduce carbon footprints. Long-standing relationships with industry leaders forged the path for Plug Power’s key accounts, including Walmart, Sysco, P&G and Mercedes. With more than 3,000 GenDrive units deployed to material handling customers, accumulating over 8.5 million hours of runtime, Plug Power manufactures tomorrow’s incumbent power solutions today. (Source: Plug Power website)

The company has had its fair share of problems over a span of fifteen years. The situation has been going to zero fast. Investors have been attracted to this situation based on the promise of its technology. Most have left poorer the Boulevard of Broken Dreams.

We look at $PLUG as an options on the modern fuel cell technology. Buying $PLUG buys you convexity on this market but the underlying payoff has also some convexity to the upside because of the impact of reflexivity (Soros) between the stock price and the business.

This situation has tremendous potential energy to the upside. Some will be disappointed that we are not pulling out a 180 pages Ackman presentation about this situation. Doing this would be intellectually dishonest. When dealing with the adjacent possible….We just don’t know.

Management has stated they they will be EBITDA breakeven at around mid 2014 on a quarterly revenue run rate of $13.50 mm. They are doing about half of this at the current moment. The company can accomodate $200mm of business with its current facilities.

The downside is zero with a walk of shame along the Boulevard of Broken Dreams.

A few facts are favoring a positive outcome:

1. Air Liquide, one of the largest industrial companies in the world, invested $6.5 million in $PLUG on May 8. This investment was strategic in nature.
2. Andrew Walsh, $PLUG’s CEO, stated the following in the recent earnings conference call:

The pent-up customer demand is visible to the team at Plug Power. That is why during the past 5 months, the toughest in the company’s history, we have not lost the design or sales employee, except for extraordinary personal reasons, because they recognize how close we are to success. I perceive this also, and in the near future, path to success will be visible to shareholders, new investors and especially our competition. I know many will be surprised, but not us. We’re building the business every day. 

The next 120 days are critical to our sales effort. I expect order flow of over $20 million in that time frame, but also, we will be seeing business steps by some customers to position large orders before year’s end. (Source: www.seekingalpha.com)

We speculate that these large orders before year’s end will be the catalyst moving the stock higher.

We have a long speculative position in $PLUG. We will be increasing this position if $PLUG’s results confirm the company’s performance benchmark.

If you want to learn more about this situation you should read the earnings conference call transcript. And don’t forget to let us know what you think.

Written by Michael Bigger. Follow me on Twitter and StockTwits.

P.S. Plug Power is a highly distressed situation and it is not suitable for the majority of investors. The likely outcome of an investment is a loss of principal.

The post The Boulevard of Broken Dreams: Plug Power appeared first on This is Bigger.

$CRMB grew its store count rapidly, however, when growth failed to achieve expectations, the stock price began it’s decline.  Most recently, 4Q2012 earnings came in below expectations.  To finance future expansion and the change in strategy from street-level stores to mall kiosks, the company announced on April 11, 2013, a private arrangement with Canadian investor Michael Serruya.  Under the terms, Serruya will purchase $10mm in senior unsecured convertible notes with a 5 year term and a $2.50 conversion price, with interest rates at 7% (cash) or 10% (stock).  Serruya will also be on the board of Crumbs.

Michael Serruya was the same “rescue investor” who called attention to our recent investment in American Apparel ($APP).  The name and the strike price on the convert tell us it is worth investigating this situation.

Here is what we know:

• Serruya will have converts covering 4mm shares (40% of the shares outstanding).

• Sales increased on a Y/Y basis (2012/2011), although 4Q sales declined (partially due to Hurricane Sandy).  Gross margins decreased as well, on a Y/Y and Q/Q basis.

• Operating Loss also widened on a Y/Y basis.

• The company has no long-term debt.

• To turn around sales, the company is focused on it’s change in strategy to mall-based kiosks and away from street-level retail stores.

• The cupcake business is very competitive, however sweets are a constant in the American diet.

We currently have a very small position.  We will be monitoring the situation closely to see if it makes sense as a larger investment.

Written by Jennifer Galperin.  Follow me on Twitter and StockTwits

The post A CRMB-y Situation appeared first on This is Bigger.

I have prepared a chart showing what the EBITDA picture could look like in 5 years from now using different scenarios. There is strong EBITDA margin expansion as the production throughput converges towards $800 mm of sales annually. And now for the numbers:

If you average the data in the matrix located at the bottom of the table you get $.73 of pre tax earnings. Using a 14 * price to earnings ratio that gets you a stock price of $10. This is a very rough calculation and as you can see the range of outcome is very wide. However, I believe that at $2.30, the stock is still a bargain even if it reaches only a fraction of this level.

In addition, Dov Charney, the company’s CEO, has an anti-dilution provision that works the following way: If $APP stock price reaches performance goals of $3.25 by 2014, $4.25 by 2015, and $5.25 by 2016, the CEO receives a total of 39.7mm additional shares. The likelihood that the stock goes out and takes out these strike is high, don’t you think?

Oscar Schafer made the point in Barron’s a few weeks ago that go private transactions for distressed apparel companies are done at between 10 and 15 times EBITDA. You can read more about Schafer’s thesis here: More Insights about distressed Apparel Companies. Using these factors on the data included in EBITDA per share for 2017 matrix, we get a stock price of in between $4.90 and $22.90.

I believe reasonable boundary conditions on APP within five years is $5.00 to $10.

Makes sense?

Written by Michael Bigger. Follow me on Twitter and StockTwits.

P.S. American Apparel is still a highly distressed situation and it is not suitable for the majority of investors. The purpose of the post is to write down how I think about this and share it with you.

The post American Apparel at $10 within Five years? appeared first on This is Bigger.

With long-term risk-free rates at historic lows, investors are taking on increasing amounts of credit risk without being properly compensated.  People need yield and as a result are buying lower quality credits.  This is happening all across the credit curve. Treasury investors are buying high-grade credits, and high-grade credit investors are moving towards high-yield.  Risky credits are bid up relative to less risky credits.  This presents a relative value investment opportunity to buy low-risk credits and sell high-risk credits.  The beauty of this trade is that it has the potential to be profitable in two scenarios:

Recession.  A recession would keep rates low, but would be a negative in particular for high-yield issuers.  Defaults would scare investors away from high-yield, and investors would move toward high-quality credits.

Growth.  If the economy shifts into high-gear and inflation picks up, the Fed will raise rates.  When this happens, investors will be able to achieve yield in lower-risk credits.  Investors will slowly pull money back toward investment grade bonds.

I like this trade because it has the potential to pay off no matter which direction the economy moves. This is the fundamental investment thesis for me in this latest spread trade.  I asked myself some key questions, prior to making the investment:

1.  What should timing be?

2.  What are the risks here?

3.  What is the best vehicle to get involved in this trade?

Timing is critical in any investment.  If you time it wrong you can be sitting on a bad trade for a long time. Even Paulson’s “$15 Billion Dollar Trade” against sub-prime mortgages was in the red before it paid off.  Here, shorting junk bonds has a high cost-of-carry (around 6% per year).  The cost of timing it wrong can be pretty high.

Risks.  The investment is profitable in both bull and bear markets.  The biggest risk is that nothing happens in the market.  In that case I will pay the cost-of-carry for an extended period of time before my trade is profitable.

Trading Vehicle.  This is an important question since it impacts my economics significantly.  That said, I am sure there are many vehicles to profit from this opportunity.  I don’t want to bet on specific bonds, but rather the overall market.  With my typical focus on equities, I naturally look to the ETF market.  Specifically, $LQD is an ETF that tracks the performance of the investment grade bond space. $HYG tracks high-yield.  Both are liquid iShares ETF’s with tight bid-offers.  $LQD is yielding around 3% and $HYG around 6%.  With bonds, we trade pairs using the concept of duration-neutral to insulate us from the impacts of interest rate changes.  $LQD has an average duration of 7.7 and HYG 3.9.  Therefore I choose the ratio 1 x 2.  Here is a chart of the spread 1*LQD-2*HYG. As you can see, it tends to spike higher during credit crisis times, and trend lower as rates decline.  Given that $HYG has only been trading since 2007, there is not enough history to see performance during high and low interest rate regimes.

I am monitoring this spread to try to determine a good time to enter the trade long. I am also considering other trading vehicles.

What do you think of the credit markets?

Written by Jennifer Galperin.  Follow me on Twitter and Stocktwits.

The post Relative Value in Credit Risk appeared first on This is Bigger.

When Rosso started Diesel did he think for one second about selling the company after a double or a triple? I doubt he did.

There are things you buy to flip and other things you buy to ride for a very very long time.

I think the trick here is to focus on the uniqueness of the brand and figure out if the brand has legs. If it does, why not go for the ride?

Do you ever consider going for a very long ride? If not, why not?

Written by Michael Bigger. Follow me on Twitter and StockTwits.

The post When Will I Sell American Apparel appeared first on This is Bigger.

Most investors are not ready to wait that long…and Eddie is slowly stealing the company away from investors a la Michael Dell but in a more subtle way. He knows you can’t hold you breath.

If you make the determination you can hold your breath for that long, by all mean, jump in the pool.

Written by Michael Bigger. Follow me on Twitter and StockTwits.

The post How Long Can You Hold Your Breath? appeared first on This is Bigger.

I find $JCP fascinating because of its boldness. It might have a chance and I am monitoring.

The non-bold consummer brands are …….

Written by Michael Bigger. Follow me on Twitter and StockTwits.

The post On Being Bold appeared first on This is Bigger.

If you care about the price, I am the wrong person to ask.

I care about the business. The yardstick is the business. I care how about they are eliminating the backroom in most store and increasing selling space by about thirty percent. I care about the new distribution center and how that will improve operation and margin. I care about some stores comping at ninety percent in Asia. I care about EBITDA margin reaching up to twenty percent.

I care about the business. Other than that I don’t care.

If you want to talk about the essence of the business, I am willing to spend the whole day talking about it.

Written by Michael Bigger. Follow me on Twitter and StockTwits.

The post American Apparel…I Don’t Care appeared first on This is Bigger.

What I have learned since the vicious tech bear market of 2000 and 2001 is that buying leading Internet brands when they fall hard on their behinds has worked very well for me. I have made a lot of money with Amazon ($AMZN), Priceline($PCLN), eBay($EBAY), Netflix($NFLX), and Expedia ($EXPE).

The buzz surrounding Groupon today sounds similar to the Amazon.Bomb … Amazon.Con discussions of 2001. Jeff Bezos discusses this in this video:

It is easy to hate Groupon right now. Anyone liking the company?

Written by Michael Bigger. Follow me on Twitter and StockTwits.

The post Why I Added to My Groupon Position appeared first on This is Bigger.