Intelligent Speculator

I have written a few times about Apple and found it very interesting to see the reaction to the launch of the tablet a couple of weeks ago. Seems like expectations were so high for Steve Jobs that there was no way it could live up to the hype. But Apple remains very solid and I still expect sales of Ipod’s and Iphones to provide the high sales that are expected. The Ipad is a longer term project that does have a future and I do think that it will eventually become a solid contribution to Apple’s revenues/earnings.

I also think the recent direction of Apple into advertising and competing with Google will provide some diversification to the model. I had written about the impact of Apple’s Ipad on Amazon’s Kindle and the power shift from Amazon to Apple but what shocked me was seeing Amazon’s purchase of a company to advance its touch screen technology. Are these guys serious? They waited all of this time before considering Apple a serious enough threat? Kindles will still be sold and bring revenues to Amazon but I believe that putting too much energy into this battle with Apple will take away Amazon’s focus from what is its core; its sales and distribution network.

When taking a look at the P/E ratios of both companies, it is striking how expensive Amazon has become with Apple’s recent decline. It is trading at almost twice Apple’s ratios for the next two years as per Bloomberg estimates, something that makes little sense to me, especially when you consider how strong Apple’s core products continue to be.

In terms of traffic, the data is not as useful since Apple does not need nearly as much traffic given the average order size but still, you can see that traffic growth from Apple is slightly better than Amazon’s over the past 12 months (+17.25% for Apple vs +15.18% for Amazon). Again, maybe comparable but then why is Amazon trading at such a high P/E ratio?

Here are the stock charts for both companies:

Good morning to you and welcome to the most important weekend of football and the biggest annual sports event in the world. The Super Bowl brings together die-hard fans (some passionnate enough to send a kid back home from school because he has the opponent’s team shirt on!), casual sports fans who do not watch all year long but are more than happy to see the Saints and Colts battle it out, but also all of those other fans who are either planning a Super Bowl party or attending one elsewhere.

Global Reach

I think that the Super Bowl’s real success is how it gets even non-fans to watch the game (the actual action lasts only 11 minutes according to a recent study). There is the spectacular half time show, the stars doing the national anthem but the incredible part is the commercials part. TV ads are an event in itself, something that is unmatched. Imagine being an advertiser. All year long you are running towards consumers trying to get them to see your ads. Then comes this 4 hour show where the audience is actually excited about seeing ads of their favourite brands. There are all kinds of theories about winning the Super Bowl ad game, but it seems clear that it is a unique opportunity for companies to get a good contact with their current and potential consumers. And it does not stop when the game ends. The best commercials will be seen by tens of millions of viewers after the Super Bowl on websites like Youtube. But the question of course is, are these ads worth it? They do cost millions of dollars to air.

Youtube could do more

I had written about this a while back but I think that Youtube certainly could generate a lot more money around the idea if it were one day able to create a similar type of event. There have been encouraging signs this year as Youtube has been more agressive in getting ad dollars related to the Super Bowl.

Imagine this, there are even studies that were done to see if there was a correlation between the Super Bowl winner and economic activity!

Betting also part of the Super Bowl

And finally, betting is a huge part of the game as well with fans betting on anything from the winner, to the winner of the coin toss or even how long Carrie Underwood’s (seen on the right) national anthem performance will be (over or under 1 minute and 42 seconds). Websites like Betfair will receive tens of millions of dollars of bets done around the world on every single detail that happens during the game.

And finally…foood!

Apart from perhaps Thanksgivings, the Super Bowl is one of the best days for grocery stores as clients come in to buy all kinds of healthy items such as chicken wings, beer, chips, soft drinks and more. Nothing like some great junk food in front of the Super Bowl right?

So that’s it for now, I hope you will all be able to enjoy the game, best of luck to everyone, as long as you are rooting for the Indianapolis Colts!:)

When I think about Yahoo, what comes to mind is a group of different segments that used to dominant in their fields but never were upgraded enough to remain at the top of their fields. Yahoo dating used to be a leader in the field. Of course now, other players such as IAC Interactive have websites that have a lot more traffic and revenues.

Then, think of Yahoo Finance, which used to be the ultimate financial resource. It was a great property to generate advertising revenues and seemed far ahead of any competitors. But look at the website from a few years ago and you will hardly notice any improvements in today’s version. It is not much of a surprise to see that others such as Google and Marketwatch are stealing market share constantly.

Yahoo mail is another good example of a service that once was a leader with Microsoft’s Hotmail but has since been made to be the inferior product mainly by Google’s Gmail service.

What Yahoo used to be….

Yahoo was once a terrific web portal, a leader in all kinds of sectors on the internet. But then time went by and they did not adapt quickly enough. Now think of AOL. A decade ago, AOL was riding high as the leading internet service provider which helped generate traffic throughout its network. But after being merged in Time Warner, the company’s decline started and it never successfully moved on when it started losing those subscribers.

Now that AOL has became an independent company again, it has been busy selling off dead services and properties. Remember ICQ, the messenging service that was used by nearly the entire web? It had been bought by AOL to merge with its own messenger service to become a dominant force. Of course, who uses ICQ nowadays? But it is part of the pieces now being sold off by AOL.

Same for Yahoo?

Well Yahoo is still early on that path but it is going full speed trying to “catch up” on AOL. One of the early moves came yesterday when Yahoo confirmed it was selling “Hotjobs”, a once leading emplyment service to Monster.com, for 225$ millions. A few years ago, the value of HotJobs was much higher. But as the quality of the website did not improve to match competition, it lost users and revenues.

Yahoo does still have a few valuable properties, especially in its Asian operations, but also in Flickr, its social image network. But I would say the trend is still very clear, Yahoo is going down and is only a few years away from AOL, trying to get funding to somehow get momentum through fresh and popular content that would generate enough revenues to offset the other declining parts of the company.

What are your thoughts on Yahoo? I know I have been criticised for being negative on Yahoo but honestly I just don’t see how Yahoo can avoid becoming the next AOL.

An important part of the collapse of the US & world economy was because of the huge real estate and debt bubble that had been created. Now, as things get back to normal, there are deals to be made in the real estate arena. I know of quite a few people who have gone to buy real estate properties in places like Nevada, California and Florida. When you compare the prices of real estate to those of other areas or those of even a few years ago, it certainly looks like a very good investment.

And when buying a well located house or condo in Miami or Fort Lauderdale for 140-150K, how much lower do you think it can go? Just seems like there isn’t much downside to those prices, especially compared with a longer term price appreciation. If the prices simply went up 25-30% in the next 3-4 years, that would represent a very good investment as well as good diversification from the stock market.

Why not simply buy a house in Florida?

But of course, taking a plane to buy a place in those areas is a lot more complicated than most investors want to handle. There are a lot of logistics involved, legal and tax implications. So buying through a fund would seem like the ideal solution wouldn’t it? And of course, given my take on why ETF’s are superior to mutual funds, I will not be talking about real estate mutual funds but rather the main real estate ETF’s.

Here is a list of the main actively traded REIT’s (Real Estate Investment Trust)

You will notice that about half of those ETF’s are Ishares ETF’s. Even given Ishares’ #1 position in the ETF market, I’m still very surprised to see how many ETF’s it has. However, Vanguard’s only REIT ETF (VNQ) is by far the biggest and is actually bigger in size than all Ishares ETF’s together! It tracks the MSCI REIT Index and would be my first choice when looking for a real estate ETF apart perhaps for someone looking for a more regional exposure to Europe or Asia.

What are your thoughts on real estate in general? And do you have any real estate in your portfolio or only through your own properties?

As recently as a few months ago, Google seemed to be the perfect company. Any move it did was seen as positive and almost no decisions were even questionned. Larry Page and Sergey Brin kept everything secret and it was unclear how Google could ever fail at anything it attempted. Like all tech stocks, Google suffered during the major stock market decline but it had recovered and analysts were back with projections of 700$ and 750$ stocks within the next 12 months.

It all changed in China….

It’s unclear yet how things will end in China but the major announcement that Google would no longer respect the Chinese governments filtering policies with respects to its search engine seemed to change many things for the powerful search engine:

-The most direct consequence of course is that Google might exit the Chinese market and lose important potential revenue & profits

-The launch of the “Google Phone”, Nexus one has not lived up to the high expectations so far

-Because of the unclear strategy of Nexus one, the future of Android is not as bright for many analysts and many speculate that Google could soon be threatened by a Bing-Apple alliance for wireless devices

-In the past few days, Google has been rumored to have run advertising acquisition Doubleclick to the ground

I’m a buyer more than ever

Personally, I do not see all of these elements as being that critical. The only signifiant event in my opinion has been the annoucement regarding China but even that is far from done as Google continues to negotiate with the Chinese authorities.

I don’t think anyone expected Google to move into the cell phone industry and become a force right away so Nexus One’s progress should not be judged weeks after its release. Just the same, Android should be judged based on its progress, not based on its current market share.

As for the recent critics that discuss Google’s dealing of Doubleclick, I find them laughable personally. Doubleclick had some attractive aspects, mostly surrounding its targetting technology and its ad display business. But the company was already on a slide when it was purchased and far from a leader in the field. So I don’t worry about it too much

So yes, I am still very comfortable with my position on Google but also with my pick for Google as one of the top stock picks in 2010. Is the momentum currently hurting both positions? Absolutely, but I’m far from worried at this point.

What about you? Buying or selling Google at this point?

A few days ago I wrote about the upcoming power shift from Amazon(AMZN) to Apple(AAPL) because of the launch of the much anticipated tablet, which is now known as the Ipad! I will not go too much into the device because there has already been so much written and you surely have already heard about it! The Ipad was greated with caution by many, probably because of the too high expectations.

That being said, the Itab is superior to the Kindle because of its look, its many uses and because of the power network that Apple built through its Iphone/Ipod line. In my last column I got a comment which I interpreted as meaning that the Kindle was not that important to Amazon, it was about much more than books. Yes, it is. But I did dig into the financial statements released Wednesday night when Amazon released Q4 results. The “media” division which includes (books, music and films, physical and electronic) still represents over half of the revenues of the company, I would call that signiicant.

But what struck me even more was the page of highlights that the company published. The first five points were actually about the Kindle! Still think it does not matter? Their answer to the Ipad is that “Readers deserve a dedicated device” – CFO Tom Szkutak. I’m not sure on what planet he lives but if Amazon intends to stick to a one use device, it will lose the battle. How many of you have a cell phone only for phone calls? Smartphones are part of a big tendancy that shows no signs of slowing down! So yes, the Kindle will quickly lose its huge lead to the Ipad and yes it does matter a great deal! You can read an interesting article on the Washington Post giving reasons why the Ipad will put the Kindle out of business.

That being said, Amazon has so much growth in other divisions that it is a very difficult stock to go short on! I already rolled the dice a bit going short on Baidu(BIDU) so don’t count on me to go short AMZN anytime soon! Amazon’s eletronics and other merchandise segment should take over the media division in terms of revenus in the next quarter and that has not shown signs of slowing down for now in part thanks to acquisitions such as Zappos.

Ultimate example today

Today, Amazon’s stock lost 6.6% in a day where almost everything went up. Why? Because it ended up conceeding to publisher Macmillan, who wanted to set its own prices. In the past, Amazon has had control over those prices but that is now changing. Publishers can now turn to Amazon and threaten the company to pull out its publication as those would still be available for other readers such as the Ipad. A few months ago, that situation did not exist as Amazon had power over the book publishers.

So, any thoughts on the future of Amazon? Would you be a buyer of the stock?

A few months ago, we started publishing the lists of the top dividend stocks. There continues to be many communication companies and so here is the latest list:

And a new one starting this month as we take a look at the highest yielding dividend ETF’s:

Do you have any thoughts on this list?

After spending an amazing weekend spent relaxing, skiing, and enjoying the cold winter (for once it was enjoyable), I am ready for a new week but before we get started, here are some of the best readings I enjoyed during the past week, one of bloodiest ones in a while with most indexes tumbling.

Is the market doomed in 2010 because of a poor January @ MarketWatch
Options Strategy: Protective Put @ TheFinancialBlogger
S&P500 pullback 2nd biggest since March09 @ Vixandmore
The old question: work or stay home? @ GatherLittlebyLittle
China leading global race towards clean energy @ NY Times
Rethinking the Latte factor @ MillionDollarJourney
Best performing stocks of 2009 in the S&P500 @ BuyMyStockPicks
Obama State of the Union 2010 @ FourPillars
Central banks getting ready for next gold move? @ ZeroHedge

We are not even a month into 2010 and already looking at what has and has not been working so far in 2010. We have been asked about oil stocks and ETF’s and at the start of the year we did a brief intro into the best alternatives. Then, earlier this week we looked into the best performing oil stocks so far in 2010.  I received a few emails from readers who wanted the same information for oil ETF’s. Here it is! First off, to kick things off, here are the main oil related ETF’s as well as their YTD (year to date) returns, price, if they are leveraged or not and finally their expense ratio.

As with most such graphs, it is not a surprise to have leveraged ETF’s with the top returns. Now if I had done this table just a few days ago, I think the results would have been very different but the truth is that Crude Oil has taken quite a hit in the past week (as have many other commodities and assets) which has meant that the top picks so far have been those that return the inverse of crude oil.

Take a look at SCO from Pro-Shares which returns -200% of the return of crude oil.

Personally, I would be very surprised to see this trend continue but I guess everything is possible given the uncertainty in the world. What are your top picks among this list???

Leveraged ETF’s have many pros and cons but the main problem around them, especially when they were first introductedto the market was the misunderstanding of how they worked by the investors and traders. Since then, we have learned a lot about how they work, their good and bad sides. One of the most important characteristics of course is that these are generally created for short term trading rather than long term investing.

The main reason behind it is that volatility can have an important impact on the return of the ETF and as time goes by, the return will not be correlated as much with the underlying index it is intended to track. A product that had been discussed for some time is about to be introduced as Direxion will be launching leveraged ETF’s with a monthly rebalancing (instead of the traditional daily rebalancing that is currently offered).

You can see the names of the different ETF’s that are being launched in the SEC filing made by Direxion here.

This will diminish significantly the impact of the daily rebalancings which is most often named when investors or the media criticize leveraged ETF’s.

But there are other consequences:

#1-An ETF that returns 3x the leverage of an index could lose almost all of its value in one month.

Example: Imagine you invested in an ETF that returns 3x Crude Oil returns. If Crude oil were to return -30% (which is a big movement but something that has been seen in the near past), your ETF would return a crazy -90%! Of course, it could also be the opposite.

#2-Also, like the daily leveraged ETF’s, it is important to consider the product specifications when entering a trade. When you have a position at the start of the month, you can expect to track the index correctly. But the later you enter in the month, the less true that is.

I think these ETF’s will certainly attract their shares of investors. Are they better than daily leveraged ETF’s? No. They are simply different and should attract a different type of investor. Paul Justice, ETF strategist at Morningstar, said the funds were a better option for longer term investors. “It allows investors to invest in a sector over a 30-day time frame and get a more accurate return if they buy at the beginning of the month. If you’re a long-term investor, you still shouldn’t expect to earn the two or three times leverage,” he said. It will be very interesting to see