Ecosystem Plays Continue To Dominate ($GOOG, $AMZN, $AAPL, $FB, $MSFT)

By: ispeculatornew
Date posted: 04.28.2017 (5:51 am) | Write a Comment

For years I feel like I’ve been discussing the “ecosystem play” and I certainly wish I had been able to buy an ETF that held all those plays. In this 2013 post, I didn’t include Microsoft but started including it in 2014 as it became clear it would successfully adapt to this new digital world:

Making The Case For An Ecosystem Play

I’ve also argued that very few other players will manage to thrive in an environment where the ecosystem players are able to leverage their power and users and that theme clearly remains relevant. Yesterday, Google and Amazon both reported earnings and both crushed it. They are all fighting their own battles but each have their own clear strengths.

How are these 5 ecosystem plays doing now? Take a look at the largest companies by market cap as of April 26th:

Of course, once that data incorporates Amazon (AMZN) and Google (GOOG) market gains at the end of the day, the picture will be even more clear. Even Alibaba (BABA) which stands at #10 could also be included in the “ecosystem” play although it would be the Chinese one. Impressive isn’t it? I also expect Facebook (FB) to deliver very strong results next week.

Here is the return since that 2013 post:

The Most Surprising Part? It’s Still Very Early

I’d argue that even though these companies are already the top market caps and have done incredibly well over the past few years, they still have incredible upside. I’ve just written an article about Facebook’s upside that will be published very soon, please sign up to our tech newsletter if you’d like to be notified when it’s out (hopefully later today). My main argument though is that these companies are now able to leverage their power to dominate a long list of industries that are quickly moving online such as software, media, news, entertainment, etc. I’ve argued that some names (notably Netflix) will continue to do well and actually leverage those ecosystems but I’d argue those will be exceptions.

More on the ecosystems to play but I felt like I had to take a look back after looking into the GOOG and AMZN earning details.

Have a great weekend

Financial Advice And Its Role In Investment Success

By: ispeculatornew
Date posted: 04.27.2017 (3:31 pm) | Write a Comment

Investmenting can be a daunting prospect. The choices, jargon and complexities can at times become overwhelming. We often justify waiting, but the only way to enjoy the long-term benefits is to get started. You could try go it alone by reading the latest investment news and keeping a close eye on market fluctuations, but consulting an independent financial advisor will most likely improve your chances of success.

The role of independent financial planners is to assist with long-term financial planning, using their experience and objectivity to help you achieve your goals. More than mere product pickers, they help you meet the full range of challenges you may face.

Avoid common investing mistakes

Independent financial advisors can help you make the right decisions for your circumstances and, most importantly, avoid the risks of investing on your own. These include:

  • Investing without a financial plan

A detailed plan is critical to your financial freedom. An independent financial planner can help you develop a realistic strategy, tailor made to your financial needs and goals.

  • Picking the wrong product

There are truly a mind-boggling number of investment products available, each with their own objectives and tax structures. An advisor will help you make the right choices to suit your circumstances.

  • Ignoring the effects of inflation

Inflation erodes the value of your money with time. An advisor can help choose the right product to achieve returns that, at the very least, compensate for the effect of inflation.

  • Not preserving your retirement savings when changing jobs

Don’t make the mistake of spending your retirement savings if you are retrenched or change jobs. It is highly likely that you won’t be able to retire with enough savings to live on. An advisor is able to compile and help you evaluate the best options available at the critical juncture.

  • Focusing on one asset class or market

Diversification is one of the keys to successful investing. As the saying goes: “ Don’t put all your eggs in one basket”. An independent financial advisor will help you to diversify your investment portfolio, broadening your exposure to different investment options.

  • Making decisions based on emotions

Investors are known to be emotional in their decision-making and poor timers of the market. They destroy the value of their savings by switching between investments at the wrong time. Advisors can help you avoid these emotional pitfalls and develop a more rational plan of action.

Questions you should ask your financial advisor

Your relationship with your financial advisor should be based on trust, so it is imperative that you feel comfortable before becoming a client. Not all advisors are equal so here are a few questions to consider when evaluating a financial advisor:

  • Are they independent?

There are two type of advisors, independent and tied agents. Independent advisors do not earn any commission off the products and do not work for a particular product provider. Tied agents are employed by product providers and may have incentives to sell certain products.

Ensure that your advisor is independent, since their objectivity will help set you on the road to your financial goals. They can help you differentiate between the numerous products available and select one that meets your circumstances and needs.

  • What are their qualifications?

The Financial Services Board (or FSB) must, by law, license all financial advisors. This requires that the advisor pass a regulatory exam and fulfill the Fit and Proper requirements, as set out by the FSB. These requirements include integrity, honesty and competency. An advisor’s maintenance and development of their professional competence is evaluated by the FSB on an ongoing basis.

Find out about your prospective advisors academic history or any other credentials. It is important to read and understand the disclosure documents provided by the advisors. This will inform you of which products your advisor is licensed to recommend and offer advice on.

  • What are their fee structures

Full disclosure and total transparency is very important. Make sure your advisor explains, upfront, what fees you should pay and how they work. Typically, fees are charged as a percentage of the investment’s value and there might be an initial fee, as well as an ongoing fee.

Some advisors charge directly for the advice they provide (typically an hourly rate). Make sure you understand the fee structure before agreeing to anything and do not pay any fees that you have not agreed to.

  • How can they help to grow your wealth?

Good financial advisors take the time to understand your needs and help to develop a plan that reflects your risk appetite and your goals. Advisors help you to gain more discipline and be more rational during the investment process.

Emotions often lead investors astray, causing them to buy and sell at the wrong time or switch between products, which could decrease the value of your investment.

Where can you find a good independent financial advisor?

Trust is one of the key considerations when it comes to choosing a financial advisor. They help you make some important life decisions so you shouldn’t take this process lightly. A great starting point is a recommendation from someone you trust and who’s judgment you value. Another option is to contact the Financial Planning Institute of Southern Africa (or FPI).

Not Buying The EBAY ($EBAY) Turnaround Story

By: ispeculatornew
Date posted: 04.12.2017 (5:55 am) | Write a Comment

While looking at different pieces of news about the stocks that I follow, I ended up on this piece of analysis done by Barclays where Ross Sandler explains that he expects 2017 to be a turnaround year for EBAY. Really? I had strong doubts but I did decide to do additional research. He blames EBAY’s struggles on 2 main reasons:

-losing market share to Amazon
-customer security concerns following a 2014 data breach.

He also explains that EBAY is better positioned now that it puts more focus on fixed pricing sales and also compares the struggle to what Expedia (and I’d add Tripadvisor) lived when they made significant technology models. Finally, they also declare Stubhub to be a significant source of revenue with potential contributions of up to $1B in 2018.

Data Breach Impact Is Overblown

I personally consider the 2014 breach impact to be overblown at this point. It did have an impact of course but I’d argue that many others have had similar issues and that it’s been over 2 years. Customers that are still not comfortable with EBAY will likely not become so anytime soon. I personally don’t buy it.

It’s All About Amazon

The other main point, Amazon is the overwhelming factor that will determine EBAY’s success in my opinion. As I wrote in my most recent piece about Amazon, I am a skeptical that EBAY even has a shot at competing. Yes, the ecommerce pie is growing quickly but so is Amazon’s share of that pie. Why? Because it’s business model is unlike any other competitor.

One benefit that EBAY has compared to Amazon is that given its business model is based off of being a true middle man. When EBAY clients buy items, they end up paying the seller and receiving the item directly from the seller. That means EBAY has very little true fixed costs. EBAY collects a fee from the seller and if the volume increases 5-10% or much more, EBAY will collect that much more.

The downside though is that EBAY has much smaller control on the overall customer experience. A big part of that is shipping of course and that makes a world of difference. Take a look at this chart of where consumers now start their shopping searches:

Amazon is increasingly dominant and that is because not only does it have incredible customer service but its shipping service is heads and shoulders above everyone else. As eBay announced it was working on getting guaranteed 3 day delivery on 20 million of its items, Amazon continues to work on expanding its same day and even 1 hour delivery. They’re obviously operating at completely different speeds and that makes a world of difference for customers.

Another critical space where Amazon is gaining an advantage is through its Prime service, one of its booming sources of revenues. Yes, Amazon is incurring costs for the services it offers to those customers such as cloud storage and video offerings. That being said, it is also a big part of the reason why tens of millions of the more valuable consumers shop with Amazon as a default. All of that market share is adding up in terms of overall shipping costs but its helping Amazon get closer to its customers through new warehouses, scale in operating its own fleet of planes and freight ships and will in theory mean that its shipping costs/unit should decline over time as it gains more scale. Ebay on the other hand does not have such ambitions or plans to get there. The other benefit of course is gaining leverage over suppliers in trying to dictate terms and products offered but also gaining more data than anyone else about its customers to offer a more tailored experience when they do visit the website.

eBay Can Survive But Not Thrive

In the end, my opinion is that while eBay will obviously continue to exist and will do well with some segments such as Stubhub, I do expect the company to continue losing ecommerce market share for the foreseeable future as will be the case for most of Amazon’s competitors given the current positioning. That makes it eBay a tough buy at these levels.

Disclaimer: Currently hold a short position on EBAY

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New Trade: Long Facebook (FB) & Short Match (MTCH)

By: ispeculatornew
Date posted: 04.03.2017 (3:00 am) | Write a Comment

Today I am opening my 11th trade of the year in what has so far been a good year. As is always the case, you can see past 2016 (and previous years) trades here:

http://www.intelligentspeculator.net/livetrades

Let’s start off by looking at the numbers:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaEarningsRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
MTCHMatch Group Inc16.3326.7315.35-3.819.84.111.94N/A5/2/20174.86N/AN/A
FBFacebook Inc142.0543.6821.123.7854.164.7120.471.064/26/20179.6550.94156.9

Revenue growth for Facebook unsurprisingly has been very steady over the years while TZOO is not seeing much positive

Long Facebook (FB)

It’s no secret that I’ve been a big believer in Facebook and that continues to be the case. It’s fair to say that Facebook’s core product growth opportunities will start to be more limited given the number of active users and ad growth. Even there though, as Facebook starts to add more video and as offline ad dollars move online, core Facebook will continue to see significant growth. Instagram is just getting started and time spent on Whatsapp and Messenger are incredibly bullish for its future. I continue to think Facebook is one if not the best growth opportunity among the tech stocks that I follow.

Next earnings: April 26th 2017


Short Match Inc (MTCH)

I’d generally say that Match has been an impressive story in recent years and I do expect that trend to continue but in this case, I’m mostly betting that it’s current valuation means it will underperform Facebook in the short term. Match does face a tremendous amount of competition and I’m not convinced that its current valuation is justified given its growth prospects.

Next earnings: May 2nd 2017

Disclaimer: Prior to opening this trade, I am long Facebook (FB)
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Closing 1 Trade (FB & PYPL)

By: ispeculatornew
Date posted: 04.02.2017 (3:05 am) | Write a Comment

Good Sunday morning! Tomorrow morning, I will be closing out one of the 7 live trades, as I close the Long Facebook (FB) and Short Paypal (PYPL) trade that was started on January 3rd. The trade currently stands at +21.10%. Last week I wrote a deeper dive into my thoughts about Paypal on SeekingAlpha, you can see it here:

Paypal is standing on the edge of a cliff

Facebook on the other hand has been doing tremendously well and while it continues to be under fire for a few things, I do like what I’m seeing out of Facebook and will certainly write more about it soon. There’s also a decent chance that I’ll be opening a new long & short trade with Facebook and as you know, it does remain my biggest single stock position.

As is always the case, you can see my 2017 (and past years) long & short stock picks and returns here:

http://www.intelligentspeculator.net/livetrades

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The Warning Signs Advise Investment Caution

By: ispeculatornew
Date posted: 04.02.2017 (3:00 am) | Write a Comment

The election of Donald Trump was always going to mean the months ahead would be interesting. He is viewed variously in society as a businessman who would shake up the political community to a man who was a bully with little substance. He has insufficient knowledge to do the job his critics say. In his first weeks, he has already been confronted with questions about the selection of his key personnel, has backed down over healthcare despite having a republican majority in both Houses and now his financial ideas are about to be scrutinized.

Credit Issues

Credit strategists have observed contraction in bank lending; money supply has slowed and this is certain to have an impact on the economy. Already Trump has announced an increase in military spending and that will inevitably impact on the domestic budget because the Republicans certainly do not want to increase Federal spending.

The US Federal Reserve figures show that commercial and industrial loans hit their peak in December and have been falling since then. The rate of decline is the fastest since the same time eight years ago. With loans and leases declining as well, the action of the Fed. to raise rates has been met with surprise. This has yet to have a major impact on equity markets but credit has regularly been something that identifies trouble before it arrives.

Worrying Trend

Trump believes he can provide momentum and expansion to the US economy; after all he is an experienced and successful businessman his supporters point out. It is not going to be straightforward it seems. Experts from Morgan Stanley see this trend as worrying, pointing out that credit squeezes historically lead to recession. The current figures are bringing back concerns about another financial crisis, similar to the one caused by the Collateralized Debt Obligations that brought such devastation to Wall Street and beyond.

The IMF has studies over 120 recessions in the world’s richest economies over the last half century and slumps have inevitably been preceded by the slowdown of credit in the months leading up to them. Without necessarily concluding that there is a sure sign of recession ahead, the figures are nevertheless concerning.

Caution

Certainly investors should be cautious. Those who are nearing retirement and do not want to take any major risks with their funds should be especially careful and find safe havens for their money. A recent Markit PMI survey has identified that US business is weaker than it has been since before the election and growth is remaining elusive. There had been signs of a boom on the way last year but there is a strong argument that it may have already reached its peak.

Lack of Growth Policies

US business it seems has debt that has been used to pay dividends or buy back stock bonds rather than to create growth. Every dollar of new debt is generating a mere 17 cents of extra GDP, a quarter of what it did in the 60s. Certainly some business strategists will be waiting to hear what Donald Trump has in mind on taxation yet already there are questions about whether is policies are either sensible or achievable. The Markets appear to be taking a more positive view than some of the analysts but individual investors should be very careful.

Time is important; delay will only increase uncertainty and perhaps help in precipitating problems? The Republicans are keen on tax cuts but whether Trump delivers in line with his pre–election rhetoric is far from certain. There are certain to be battles ahead because there are many within the Republican Party who seem to be as opposed to Trump as they were to the Democratic Candidate, Hillary Clinton.

Business will go its own way. Decision makers looking at their financial figures and devising future strategy are likely to have a cushion in place for mistakes. Individual investors often have no such cushion and a poor decision can cause untold harm, especially for the average couple that is approaching retirement and building up a fund to provide a comfortable life. The coming months are likely to see volatility in society anyway; the important thing for people is to give plenty of thought about where to invest their money and minimize the risk.

 

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Harald Seiz CEO of Karatbars International: Make Gold Great Again

By: ispeculatornew
Date posted: 04.02.2017 (2:55 am) | Write a Comment

Who cares the most about you? Who knows the most about you? Politicians like to smile, kiss babies and make you feel special. But, in the end, you are free to live your life and only you can build your wealth.

There is no government program that will make you great. Even, if the United States becomes great again, that might not translate to your financial portfolio. Learn why you should concentrate on making gold great again.

Gold is Great

Throughout history, the leaders of the world have tried to control gold. American President Franklin Delano Roosevelt confiscated gold when the country was in the Great Depression. China forbade ownership of gold under the communists. Why do politicians seek to control gold?

Gold is money. Gold is power. The elite are just like you, they were born of a mother. They put their pants on, one leg at a time, just like you. What is the difference between the elite and you?

The elite own gold.

While the powerful have been holding down the price of gold, they have been purchasing it behind-the-scenes. The Russians and Chinese are now buying gold in droves. The Indians have always purchased gold for their Hindu weddings.

At the beginning of 2017, there are signs of the gold price rising again. Are the wise “making gold great again?”

Gold Does Not Rust

“Gold is the perfect metal. It is soft, does not rust and can be used for industrial purposes. It is also hygienic, which is why it is used in teeth.”, adds Harald Seiz CEO of Karatbars International.

During Brexit, the masses bid up the price of gold. Some are whispering about the return of the “Gold Standard.” This would lead to the increase of gold as people purchased the precious metal to conduct trade.

Be Great: Buy Gold

Mr. Harald Seiz believes that “everyone should have the opportunity to obtain good, solid financial protection.” The wealthy own gold and lease it out from Switzerland. This gives them a steady stream of income. Gold is basically indestructible.

Gold protects against the “ever-recurring financial crises,” which some say are rigged by the powerful. You can purchase Harald Seiz gold Karatbars and be part of the solution. If you want to be #1 and win the gold medal, then you must join in with the wise people who are working to “make gold great again

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Adding 2 New Stocks To Stocks I Follow (SNAP, SHOP)

By: ispeculatornew
Date posted: 03.17.2017 (3:00 am) | Write a Comment
Today I’m happy to confirm that I’m adding 2 new stocks to the list of stocks that I follow:
Snapchat Inc (SNAP)
Shopify (SHOP)
Shopify (SHOP) is a Canadian based company that has a platform making it very easy for merchants to start selling their stuff online. That means making it easier for merchants to build a website, list their items, process orders, etc. There is of course a lot of competition in the sector but it’s fair to say that SHOP has emerged as a market leader and given the fact that my web company does have items to sell (not on this blog though), I did end up going through their website quite a bit as well as look for competitors. I then spent a bit more time looking at its financials and while I doubt I’ll be trading the company anytime soon, I will start following it, listening earnings calls (or reading transcripts), etc. So you should expect some commentary in the coming months.
Snapchat (SNAP) is a fascinating company. If you exclude Uber and Airbnb, it is the one company I was most looking forward to turning public. There has been an incredible amount of buzz about Snapchat and I’ve personally read at least 15-20 good pieces about Snapchat. As is the case for other IPO’s, I don’t expect to trade the stock anytime soon but I am excited to get going. With LNKD’s purchase by MSFT about to close, we’ll be down to Facebook (FB) and Twitter (TWTR) in terms of listed social media stocks. I know that SNAP considers itself a camera company 🙂 Here are my main takeaways so far:
-SNAP’s user engagement is very impressive I’m much more interested (at this point) about that evolution than in revenues or profits
-SNAP’s user growth is a major source of concern. There is no way that SNAP can livve up to its valuation if Instagram truly stopped or slowed down significantly enough SNAP’s user growth.
-Evan Spiegel, SNAP’s foudner and CEO does so far look very impressive in terms of product ideas and execution. Given SNAP’s listed shares are non-voting, this is a similar case to Facebook’s where SNAP’s future to a large extent depends on Spiegel’s performance. Tough to ask him to be the next Mark Zuckerberg but this will be interesting to follow
Overall, I personally would and will stay on the sidelines for now. I’d be very afraid to be both long and short at these levels until I see a few more earnings/numbers come out.
I’d love to hear your thoughts if any on Snapchat though. Are any of you long? 
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New Trade: Long Priceline (PCLN) & Short Travelzoo (TZOO)

By: ispeculatornew
Date posted: 03.16.2017 (3:00 am) | Write a Comment

Today I am opening my 10th trade of the year in what has so far been a good year. As is always the case, you can see past 2016 (and previous years) trades here:

http://www.intelligentspeculator.net/livetrades

Let’s start off by looking at the numbers:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
PCLNPriceline Group Inc/The1767.9828.2420.4520.6616.474.62200.221.23217.0719.0224.87
TZOOTravelzoo Inc9.219.3621.67-3.19-9.2931.311.359.18-3.44N/A

Revenue growth for PCLN unsurprisingly has been very steady over the years while TZOO is not seeing much positive

 

Long Priceline (PCLN)

Priceline has been one of the most consistent stocks not only in the tech sector but in the overall market for over 10 years. It has been able to improve its core products but also make timely acquisitions to cover areas that it was lacking. Priceline is the clear leader in the online travel space and while I do expect to see TRIP gain ground at some point, there really is no one that can challenge PCLN giving me confidence that they will be able to maintain steady growth on top and bottom lines as more of the travel booking dollars move online.

Next earnings: May 3rd 2017


Short Travelzoo (TZOO)

Continues to be challenging for me to understand how Travelzoo (TZOO) could be trading at a comparable forward P/E to Priceline. Not only has the company displayed very little top or bottom line growth but I’m not seeing much in terms of product innovation in a fast changing environment. I personally see TZOO’s model in a similar way to what Groupon was built on which still works but is clearly not doing as well these days.

Next earnings: April 27th 2017

Disclaimer: Prior to opening this trade, I do not have a position on PCLN or TZOO
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Crude Oil Is Not Yet in the Clear Despite OPEC’s Cut

By: ispeculatornew
Date posted: 03.15.2017 (3:00 am) | Write a Comment

OPEC succeeded in getting its member nations and some other non-OPEC producers to agree to a deal to cut their oil output last year. The output cuts were necessary in order to halt the supply glut that has depressed oil prices for much of the last three years. The supply of crude oil has outpaced the demand due to the return of producers such as Iran and Libya as well as an increase in U.S. shale oil production.  However, it seems that the deal might be unraveling at the seams because some countries are not committed to holding their ends of the deal.

U.S. Shale oil cast dark shadows on the prospects of oil

Crude oil has managed to find support around $55 per barrel up from its $30 lows at the beginning of 2016. However, one would have expected OPEC’s deal to cut oil production to propel oil prices faster and higher towards the 2014 $100 per barrel price. The main reason oil prices haven’t spiked in tandem with OPEC’s move to reduce output is that the supply glut in oil is still persistent.

Interestingly, the supply glut situation has remained unchanged because U.S. Shale oil operators are now increasing their output from shale basins because of the uptrend in oil prices. Alex Poldoski an analyst at Saxon Trade observes that “the weak $30 price of oil made oil production unprofitable for shale oil drillers but the recent uptrend is encouraging shale operators to return to the markets.”

The U.S. Energy Information Administration said U.S. oil output increased by 1.7 million barrels in the week ended March 3. Interestingly, OPEC’s secretary-general Mohammad Barkindo acknowledges the influence of shale oil produces when he said “we did confess that we do not have sufficient understanding of how they operate and their impact on us.”

Saudi Arabia wants other countries to pick up the slack

Saudi Arabia oil minister Khalid Al-Falih expressed cautious optimism about the OPEC deal during his remarks at the CERAWeek that held earlier this month in Houston.  Al-Falih started by noting that the compliance level in deal to reduce output has outpaced the low expectations on OPEC’s ability to pull off the deal. In his words, “the market had low expectations, which we have exceeded by a large degree… We are definitely on the right track and are picking up speed in terms of delivery.”

However, the deal to cut production hasn’t done much to end the supply glut in oil; in fact, one can argue that OPEC’s supply cut is providing U.S. shale oil producers to increase their output. There are indications that OPEC might need to extend the deal to cut output beyond the first six months of this year if it really wants to end the supply glut in oil.

However, Al-Falih says there’s no point discussing the possibility of extending the deal beyond the first six months of the year if the other participants in the deal are not ready to uphold their ends of  the bargain. Last month, OPEC reported about 85% compliance in the deal to but the high compliance level was recorded because Saudi Arabia went out of its way to cut its output beyond its initial promise.

In Al-Falih’s words, “it is not going to be fair or acceptable that some countries will carry the burden for all… We’ve been willing to do it for the front end but we expect our friends and partners to pick up the slack as we move forward.”   Al-Falih’s also noted that Saudi Arabia “will not bear the burden of free riders… Saudi Arabia will not allow itself to be used by others. My colleagues have heard that privately, and now I’m saying it publicly.”