Investing Commentary

SumZero is the Best Way To See Your Competition

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For the last few weeks, I have really been digging into the deeper financials of stocks.  It all started when an acquaintance of mine brought along a boyfriend to the bar.  He was a wall street guy, and he really blew my mind when it came to how much he knew about some of his stock holdings.  And even more impressive – he was not even a trader!  I think he worked in debt restructuring, but that’s another story.  Anyway, he turned me on this site SumZero, and I think anyone who invests in stocks needs to know about it.

Basically, SumZero is a website for investing professional to share ideas and network.  Sort of like a linked in/facebook kind of situation, but for guys whose bank accounts end with many more 0’s.

If you’re a pro (and if you’re reading this I’m betting your not), the site boasts

Nearly every major hedge fund and mutual fund is represented in SumZero’s userbase. SumZero members have access to a database of thousands of actionable investment ideas written exclusively by their peers at other elite hedge funds/mutual funds.

But you have to apply for membership, and probably answer some sort of John Paulson trivia question.  But fear not, my bottom caste personal investors.  SumZero also offers one in-depth, insightful, and professionally written article per week, for FREE!!!  That’s right, all you have to do is sign up, put in an email, and each week an actionable investment idea will be delivered right to your electronic mailbox.

The last one I received was written by Julia Bykhovskaia, a CFA at Concordia Advisors.  The article was on the stock Zipcar (ZIP) and was actually about entering a short position.  But check out the detail in her analysis

ZIP currently trades at ~150x TEV/2011 EBITDA, while comparable companies trade at ~13x TEV/2011 EBITDA. It can be argued that ZIP deserves a higher multiple due to the higher expected growth rate, however 150x is excessive. Even if one believes ZIP should be valued at 20x multiple (still unwarranted), the fair value of the stock would be $4.5 per share. To justify current valuation assuming 20x multiple the Company will have to generate $54mm in EBITDA next year. Assuming 10% EBITDA margins (generous; 2011 is estimated to be 3%), Revenues will have to be $540mm. This kind of financial performance is many many years away at the very best. ZIP is projecting ~$237.5mm in Revenues and ~$7mm in EBITDA in 2011.

That’s some heavy stuff!

But this is the type of knowledge and analysis we are up against when we buy stocks.  There are people out there, like Julia, who are combing over financial statements 10 hours a day, 5 days a week, all so that they can beat you to the next trade.

And while my investing philosophy does not involve beating anyone to the next trade, if I plan on being in the market, I should at least know what my competitors are up to.  Maybe I’ll take a lesson from them and step up my game.


I'm a dividend growth investor who is aiming to retire early in 5 years at the age of 45. My goal is to live off the income my dividend portfolio and rental property produce exclusively and leave the corporate rat race. I hope you will join me in this journey!


  1. I don’t buy that stuff, DP! I have a friend who’s into private equity also. In my opinion, these guys are absolutely as clueless about where a stock is headed as anybody else, they just can sound a lot more confident, that’s all.

    I get suspicious at anyone who can crunch a few numbers and then tell me that a company is definitely worth 1/5th what its publicly trading for right now.

    Personally, I’m super happy to have people like that on the other side of my “trades.” I’ll stick to buying great companies at decent prices and holding for a long time…and let CPAs fight each other over trailing EV and EBITDA, short-selling, and LBOs, etc! 🙂

    Sorry if I ranted a bit, but I really believe its the fact that we don’t get caught up in that kind of analysis that investors like us have a real advantage over traders and speculators. I’m buying a business, not a ratio.

    just my 2 cents 🙂


  2. mr. spiffy

    That’s not heavy stuff. It’s called fundamental analysis adn the reason the boyfriend knew so much about stocks (even though he works on the credit side of the business) was because he’s in the business and HAS to know.

    Despite the popular opinion, not all Wall Street people are crook ad/or idiots.

    • I don’t think all Wall Street people are crooked and/or idiots, and I never said as much. That street is cutthroat, so I doubt anyone that’s not intelligent could last very long. As for the crooked thing, well, that’s a person to person judgement.

      And yes, that is fundamental analysis, but in the world of individual, non-professional investors, I think it’s safe to assume a large percentage never dig this deep into a stock, not to mention this is only an excerpt of an exceptionally long article that went even farther in depth.

  3. Cool stuff. I’ve never heard of it, but can’t hurt to take a look. Thanks for the heads-up. Sounds like pretty good analysis.

  4. DP, be wary of geeks bearing formulas :).

    I have a friend that’s in private equity and he spouts analysis like that all the time. I don’t give it a second thought, though.

    I think that it’s the fact that us individual investors aren’t slaves to that kind of modeling (like the rest of wall street) that we are able to outperform over that group so often. In other words, I don’t think its a coincidence that the greatest investor that ever lived was headquartered in Omaha, using a calculator and not Manhattan brandishing a super-computer.

    I say leave them to their modeling and multiples-analysis and just focus on buying great companies at decent prices!

    Personally, I’m happy to have people like that on the other side of my stock purchases. 🙂

    Just my two cents 🙂