Jim Chanos: ‘If I Had To Pick One Short, It Would Be Seagate’; Companies like Samsung are exiting the HDD business as quickly as they can

May 9, 2013 Leave a comment

JIM CHANOS: ‘If I Had To Pick One Short, It Would Be Seagate’

Linette Lopez | May 8, 2013, 6:03 PM | 1,556 | 1

Jim Chanos believes in the mobile revolution, and that means the death of the PC and all the businesses that exist within the PC family. At the annual Sohn Investing Conference today, he focused on one branch of that family (which he identified as value traps, of course) in a presentation called, Mobile Computing Revolution: Collateral Damage in Hard Disk Drives. “Most people have way too much storage as it is on their laptops and desktops,” he explained. “The move to the cloud is actually more efficient… The amount of storage out there still exceeds the needs as fast as data is growing.” In short, no one needs hard drives anymore. Companies like Samsung are exiting the business as quickly as they can. In fact, he pointed out, Samsung sold their disk drive business to his short pick at half of revenues in 2011 — the short pick is Seagate. He mentioned another company, Western Digital, in his presentation as well, but he particularly focused on Seagate because it’s exhibiting all the characteristics of a classic Chanos short. First off, there are, of course, accounting issues. It wouldn’t be a Chanos short if there weren’t. Seagate put about $1 billion of goodwill on the books after its Samsung acquisition, which can be great way to mask cash flow problems. Not only that, but the top 3 person in the company quit last night. And if this isn’t enough for you, Chanos put up a table that shows that the top Seagate stock holders are selling like crazy. “I think it’d probably be best if you did too,” he closed. The stock was trading at $42.32, and is now down 3.36% in after hours trading.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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