Brightcove’s Prospects Look Brighter

A key change at Brightcove since my last post has been the turnover at the top.  In August 2017, after three consecutive quarters of earnings misses, Dave Mendels, who had served as CEO for more than four years, agreed with the Board to step down.  Andrew Feinberg, Brightcove’s COO, stepped in as interim CEO.

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Homebuilder Stocks Fall as Optimism About Global Economic Growth Rises

Homebuilding stocks have been the best performing of the 150-odd sectors in the Dow Jones U.S. Total Market Index, up 44.4% over the past 12 months as of November 8. Last year, they declined sharply in the face of Federal Reserve rate increases; but they began to show signs of a bottom in late November, just ahead of the Fed’s decision to reverse course on interest rates.

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Notes and Analysis from HPE’s 2019 Securities Analyst Meeting

At its 2019 Securities Analyst meeting (SAM) held in New York City on October 23, the senior management of Hewlett Packard Enterprise (HPE) said that the company was poised to enter the third phase of its evolution: pivoting to sustainable, profitable growth.

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SNH Still Seems Behind Goal on Asset Sales

SNH has set a goal of $900 million in announced or closed asset sales in 2019.  With more than nine months of the year gone, it has completed only $119.1 million in asset sales and has an estimated $125 million of pending sales.  Thus, total announced or closed asset sales to date are roughly $244 million, which means that the Trust must announce another $654 million of asset sales in the remaining ten weeks of the year in order to reach its target.  (If the $99 million in net proceeds that SNH received from the sale of RMR shares in July is counted toward the $900 million objective, it would have to sign up for $555 million of asset sales by the end of the year to reach its target.)

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Eliminating the RMR Discount

The five publicly-traded REITs that are managed by the RMR Group, Inc. (RMR), a Newton, Mass.-based property manager, have often traded at significant discounts to their peers. The discount has been attributed to the nature of the relationship between RMR and the REITs. RMR is an external REIT manager, which some claim raises potential conflicts of interest because the external manager can benefit at the expense of the managed REIT. For that reason, many analysts and investors prefer REITs that are internally managed, which they say better aligns the interests of management and shareholders.

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NYT Magazine Article on the Boeing 737 Max

The cover story in this week’s Sunday New York Times Magazine is “What Really Caused the Deadly Crashes of the Boeing 737 Max?“. While acknowledging that malfunctions caused the crashes, it also documents in detail the errors made by the crews of Indonesia’s Lion Air Flight 610 and Ethiopian Airlines Flight 302 that might have prevented them. It describes Lion Air’s dismal safety record and culture of corruption. It discusses the weaknesses and failures of the Maneuvering Characteristics Augmentation System (MCAS) that was incorporated in the Max to address certain design problems that can cause the aircraft to stall during takeoff. It also describes the global decline in “airmanship” – the ability of pilots to adjust intuitively to changes in aircraft performance and flight conditions – which was a contributing factor to these crashes.

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StoneMor’s Rights Offering

This week, StoneMor Partners, L.P. (STON) announced that it has set a record date of September 26, 2019 for its upcoming rights offering. Soon thereafter, once the SEC declares the registration statement to be effective, the partnership will mail a joint proxy/prospectus to unitholders. STON anticipates that the rights offering will be completed early in the 2019 fourth quarter.

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A Review of the Markopolos Report on General Electric

On August 15, 2019, Harry Markopolos, who gained fame as the person who exposed the fraud perpetrated by Bernie Madoff, released a 175-page report entitled “General Electric, A Bigger Fraud Than Enron.” GE’s stock fell 11.3% on the day; but it has since regained all that it lost after GE, security analysts and the media criticized the analysis and conclusions of the report and questioned the motivations of Mr. Markopolos, who had entered into an agreement with an unnamed hedge fund to profit from a decline in GE’s share price. Although this tempest seems to have passed, I will offer some thoughts on the content of the Markopolos report and its potential implications for investors.

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A Reset for Senior Housing Properties Trust

In response to the financial difficulties of its primary tenant, Five Star Senior Living (FVE), Senior Housing Properties Trust (SNH) has been forced to negotiate a change in the structure of their business relationship.  Specifically, SNH has agreed to cancel its five master leases with FVE and will instead have FVE manage the properties for a 5% annual fee.  This move is a consequence of the nationwide building boom in senior housing communities over the past decade that has put downward pressure on occupancy rates.  After providing some background on this issue, I will focus on the projected impact of this new business arrangement on SNH’s future financial performance.  Complicating the analysis is SNH’s decision to sell $900 million of mostly non-core assets to upgrade its portfolio and reduce debt.  SNH is among the earliest in its industry to address this problem and that should serve it well as others eventually are forced to come to grips with it.

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The Old and New Five Star

Five Star Senior Living (FVE) and its landlord Senior Housing Properties Trust (SNH) have previously announced a restructuring of their commercial arrangements whereby SNH will cancel the five master leases that cover 181 senior living and skilled nursing facilities currently operated by FVE.  Under the new arrangement, FVE will manage those properties for SNH for a fee equal to 5% of gross property revenues and reimbursement of direct property operating costs. FVE will also have the opportunity to earn an annual incentive fee equal to 15% of the excess over targeted EBITDA for the properties up to a maximum of 1.5% of gross property revenues.

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