Archive for January, 2009

Investment Talking

By: ispeculatornew | Date posted: 01.31.2009 (8:28 am)

Every Saturday, The Intelligent Speculator does a review of good read around the blogosphere. Here’s what caught my attention this week:


Look at this video about Fundamental VS Technical approach.


There is no Free Lunch according to Zack

Magic Diligence takes a pass on Deluxe (the company that I get checks from!)

When Not To Invest In Stocks | The Stock Investor – Stock Advice And Tips posted at The Stock Investor.

Important Points about Trading Systems posted at Forex Strategy.

Dry Bulk Shipping Companies & Baltic Dry Index (BDI) – Comparative Stock Analysis posted at One Family’s Blog.

At Dividends Value, they did a write up on Cullen/Frost Bankers

Moolanomy.com talks about the very important issue of 401K and IRA funding limits

What are Annuities? – Fixed and Variable posted at ABCs of Investing

When Not To Invest In Stocks | The Stock Investor – Stock Advice And Tips posted at The Stock Investor

What is a Hedge Fund – A Definition posted at Investing School

Diversification Can Be Achieved From Fewer Stocks posted at Dividend Tree

Carnivals:

Festival of Stocks

Carnival of Personal Finance

Amazon (AMZN) crushes estimates

By: ispeculatornew | Date posted: 01.30.2009 (4:00 am)

Am I glad that I waited before getting involved in a trade on Amazon given the fact I was probably going short, but had been worried with their results coming out. And it turned out that Amazon turned in some impressive numbers, a net income of .52$ per share for Q4, up from 0,48$ one year ago. That is a good indication that Amazon will be able to come through the current economic turmoil with some good results. The most impressive number is probably the sales growth of 18% to $6.7 billion! They were able to generate such strong numbers while maintining a gross margin above 20%. All is good it seems for the CEO Jeff Bezos heading into en environment where competitors are suffering dearly. A major part of the growth came from international markets as sales increased 19% in the quarter! It is also crushing competitors such as Ebay that have been going through much tougher times lately. The direction for the whole company is very clear for both consumers, employees and shareholders which is a great sign. “We remain relentlessly focused on serving customers with low prices, great selection and free shipping offers, including Amazon Prime,” said Jeff Bezos, founder and CEO of Amazon.com. “We’re particularly grateful for the unusually strong demand for Kindle in the fourth quarter.” By the way, if you did not know, Kindle is the largest collection of ebooks in the world, which especially with the growth of PDA’s and smart phones, has been a growth segment for Amazon.

Stock is up 11% after hours up to over 56$, a very strong performance and if it holds up, I will probably be doing a trade on it during the weekend. Not that Amazon is not a good company, far from it. But I think that its P/E ratio over 30 is very expensive, especially when you look at other companies that are expected to do well in the current downturn. There are many possible ways to do the trade and I’d love to get suggestions but let’s just say that I doubt AMZN is the only company that can generate growth in this environment, and some of the alternatives are trading at P/E’s under 20.

So expect a 3rd trade for 2009 to be made on Monday! I will have it published in the morning and act on it

Trade updates

By: ispeculatornew | Date posted: 01.29.2009 (4:00 am)

Hello everyone,

Today I just wanted to give an update on the current trades and positions:

LONG AAPL (-2,67%): I almost got stopped out of this position (if it had reached -20%) but it is rallying back thanks to strong earnings and seems to have survived the news about Steve Job’s health, which was the major negative in the stock. I’m still confident that AAPL’s strong product base and growing popularity in the world as well as its growing influence and power in the cell phone market will bring great things for the company.

Long BIDU/Short YHOO (8,60%): I had initially closed off half of this trade which was a great thing because the trade started going against me big time for a while with a lot of speculation surrounding Yahoo. Yesterday’s overperformance announcements on YHOO would have hurt except BIDU was rated as a BUY by Bernstein today so it raised more. BIDU is announcing its results February 6th and I’ll be hoping that it can overperform as YHOO had did but also clear up a lot of speculation about the accusations that they have been at the centre of for a few months regarding non-explicit advertisements, especially in the area of pharmaceutical products.

Long GOOG/Short IACI (14,44%): Very happy with how this trade has been going so far, it has been less than a week and it’s 75% done from its target. Interactive is announcing its results very soon and that could be a very interesting day if I still have the position in.

So overall, picks (including closed ones) since I started computing (October 2008) are up 2.79% on average and overperforming the S&P500 by 6.18% so far.

My 2 picks of 2009 so far have averaged about 17% against a flat market.

I am tempted to take a position into Amazon because to me, the stock looks expensive again on a valuation basis but it is a bit risky because AMZN is actually announcing its results in a few hours and you never know what to expect when that happens. They have given indications of very strong results for the 2008 holiday season and so to be certain, I will wait a bit longer to look in more details into their results before taking a new position. Always seems like a gamble to me to take a new position right before earnings announcements. I know some investors love to do it when anticipating results or when there are rumors of under or overperformance, but it’s just not what I’m into. It might happen on Friday but I’ll probably give it more thought over the weekend so we’ll see how that goes.

Executives are using private jets, so what?

By: ispeculatornew | Date posted: 01.28.2009 (4:00 am)

I am usually a fairly moderate person and while I would not consider myself to always agree with political right views, I usually do. While I do not usually agree with left wing views regarding the economy, I can usually understand the logic behind them in cases involving unions for examples. I do not often agree, but I can have a conversation with an opponent and get their point. But recently, especially in this financial crisis, I have been increasingly hearing the arguments and accusations towards the high paid executives for using corporate private jets instead of using couch seats on commercial airplanes.

There have been numerous accusations but the most vocal ones have come during the very public hearings of the US auto executives. I will not stand here and say that their actions over the past few years were justified, but to blame them for the taking the trip from Detroit to Washington by corporate jet instead of by driving is ridiculous in my opinion and yet we have very rarely heard any opposite opinion in the media.

However, the calculations seem so easy to understand here. Let’s not argue (at least not right now) on the pay of executives and if it is justified or not. But let’s just take raw numbers. Imagine that an executive has an annual salary of $10 millions. Could be higher or lower but let’s use that number. Ok so imagine that our executive has no vacations, here is the breakdown:

Annual salary: $10,000,000 USD
Weekly salary: $192,308 USD
Daily salary: $38,462 USD

Now let’s just count it down. Is you use your car, it will obviously take a while to go, perhaps half a day, which is worth about $20K. And the same reasoning works for commercial airlines. Even if the flight was to cost $20K, wouldn’t it still be worth it? Personally, I would prefer having that executive, even if paid by the government as in many banks right now, to be working on a recovery plan for his bank than waiting in line in an airport, I would feel that my money is better used if he can actually be productive while working aboard his jet.

Is the executive better than me? I would think not! But is his time worth more thann mine? Economically? Absolutely!! Do you look down on someone paying others to clean their house? How is it different really? I’m not saying there is no abuse but generally I think it is well used…What do you think? Don’t you agree that the (mostly) left wing media often only shows one portion of the story?

Tree.com(TREE) opinion

By: ispeculatornew | Date posted: 01.26.2009 (4:00 am)

Tree.com was the result of a spinoff from IAC interactive Corp last year, and as I discussed last week, I have not been a fan of IACI recently so for them to finally do a spinoff of this once important segment of their business was interesting to say the least. I’m not sure of the reason behind although it hardly seems like they were trying to set aside a new growth opportunity. Tree.com is a sum of various parts owned by IAC Interactive in the field of real estate and more specifically in the area of helping investors or owners value their house, get a new mortgage, refinance their property, etc. Their main properties are:

  • Lendingtree.com (personal loans, auto loans, credit cards, etc)
  • RealEstate.com(locating homes, getting values, etc)
  • GetSmart.com(loans & credit cards comparison website)
  • HomeLoanCentre(resource website for home buyers
  • Domania.com(locating homes, getting values, etc)
  • etc
  • They built a whole array of properties that were targetting a major segment of the consumer business real estate web arena. Problem is, even in the past, this company was not profitable so it’s not difficult to imagine that the next few months will be very difficult. While they have spent money on acquisitions and such, their core operations have also not been able to generate a profit.

    At last year’s pace, Tree.com would not have much left to play with on its balance sheet and I would think that things could get considerably worse. And while they do have important assets (LendingTree.com, Realestate.com, etc), they are in a very tough area of the economy. With the collapse in house pricing of the last year or so, it is difficult to imagine many home buyers being ready to jump back in the game even when prices do become more stable. So their revenues would probably continue to slow for a long time even after an economic recovery. And with consumers becomming more prudent in this area of their finances, they might be tempted to use professionals instead of doing it all themselves thus hurting the area where Tree is targetting.

    Of course, with the price of Tree being so low, there is a lot of speculation involved and the price has actually moved between 11.10$ and 1.42$, very volatile. I would not be long this stock long term, and might be tempted by smaller term plays either as long or short, but to me it is very interesting that some investors are owning this stock, I honestly do not see much value in it all things considered. I might do a trade shortly involving Tree so stay posted.

    Investment Talking

    By: ispeculatornew | Date posted: 01.24.2009 (5:39 am)

    Every Saturday, The Intelligent Speculator does a review of good read around the blogosphere. Here’s what caught my attention this week:


    Where Did the 2008 Investment Losses Go? posted at My Wealth Builder

    Bid Ask Spread posted at Investing School

    How to Invest with $10,000-$50,000 in the Current Market Condition posted at Recession Thoughts

    Where in the Market Should I Invest? posted at The Penny Daily

    Stock Trading To Go presents Beginner’s Guide to Currency ETFs

    Nurseb911 presents DIY Investing Q&A: posted at Triaging My Way To Financial Success

    Bear Market Recoveries: Returns Occur Early In New Cycle posted at Disciplined Approach to Investing

    iShares 529 Plan: Save for College with ETFs posted at The Sun’s Financial Diary

    Hedge Fund Conflict of Interest posted at Michael James on Money.

    Carnivals:

    Festival of Stocks

    Carnival of Investing

    Google (GOOG) vs IAC/InteractivCorp (IACI)

    By: ispeculatornew | Date posted: 01.23.2009 (4:00 am)

    With only 4 trades currently in, I finally got a chance today to go over numbers of a few more and decided to enter a new trade, going long Google vs Short IACI. This is basically a play on a downturn of internet advertising that is affecting IACI a lot more than it is Google.

    Google, now an internet heavyweight announced its earnings a few hours ago, coming in with earnings per share of 1.21$ in its first ever quarterly decline as its results are down 67% from the same period last year. It is becomming very clear that the impact of the economic downturn is hurting the advertising business very badly as major companies are cutting their expenses, advertising being one of the easiest ones to accomplish, especially when rivals are doing the same. I am starting to see the impact of this in our internet businesses and it is increasingly clear that the whole industry is getting hurt badly. However, Google seems poised to be hurt less severely mainly for 2 reasons:

    • Up until a few months ago, Google was still more in a growth mode than in a monetization mode and that now makes a major difference. Many sections of Google did not contain any advertisements and so the recent drop in ad rates has been partly compensated by the new available spots in areas such as Google Finance or Google Maps. The recent results reflect part of this but not entirely. Another major example would be Youtube. There are no doubts that so far the acquisition by Google has not been profitable but you would have to admit that they were not putting as much energy into it either. Since its start, Google has done business by allowing new products to first gain important market share, get its users hooked and then once that happens, start to introduce ways to generate revenue streams. They seem to be slowly moving in that direction now and that will give them a major advantage in battling this downturn.
    • Google has been very innovative in how its ads are displayed and while ads displayed next to searches are still the major part of their revenues, they have been gradually adding ads in videos, in RSS feeds, on mobile content, in maps, etc. This enables them to offer a vast range of advertising options.

    IAC/InteractiveCorp on the other hand is one of the most intriguing companies on the internet in that it has owned fabulous properties for a long time but has never been able to truly find its identity. When it did the spinoff of Expedia(EXPE), it was mainly to concentrate on Ask.com, its failed effort to challenge Google in the search business. After putting up massive efforts and amounts of money, IACI finally quit the race and decided to concentrate on other businesses.

    But as diverisified as IACI is trying to be, they are getting hit very hard in their main areas:

    -Dating: The internet dating industry is going to major changes as the business model is being revisited with many major players deciding to go back to the free model, as they are unable to compete with some other websites that offer the same service without fees. Match.com, owned by IACI will be hit hard by this and have a difficult time generating much profits.

    -Search: This will have a slowdown and I would expect Ask.com to be hit more severely than Google simply because many advertisers on Ask are actually using their traffic to send back to Google (pay per click arbitrage).

    -Local web: This is one area where I think InteractiveCorp might do better, it is a promising area and they do have solid properties. Their problem is that they are losing market share to Google who has a more important presence on phones, etc and have been expanding their services greatly.

    Disclaimer: Author does not have any positions in GOOG or IACI

    Trades updates

    By: ispeculatornew | Date posted: 01.22.2009 (6:38 pm)

    Hello everyone, a few quick updates on the current trades:

    Oct 22nd: Long AAPL: -8,78%

    Oct 31st: Long EBAY: -22,81%

    Nov 19th: Long BIDU/Short YHOO: +6,43% (including the half trade taken off earlier on)

    Jan 9th: Long IDC/Short KNOT: +20,79% (I will close out this position tomorrow morning!)

    AAPL: So far that trade has done better than the market, mainly because of the results that were announced yesterday!

    So overall since in the past 3 months, including closed trades, picks are doing not bad:

    Performance: -0,53%

    Average compared to S&P500: +7,48%

    EBAY: Stopped out of that one this morning as it reached the maximum 20% loss I’ve set on trades..!  All for now, I will update the performance of IDC/KNOT tomorrow at the open!

    Valueclick (VCLK)

    By: ispeculatornew | Date posted: 01.21.2009 (4:00 am)

    Valueclick is a stock that I have been looking at for a long time and trying to get an opinion on and still today as I write this after another extensive look at their products, I have a difficult time being convinced either way. Valueclick has been involved in internet advertising for a long time and through acquisitions mostly it was able to cover most of the different segments of internet advertising purchasing Commision Junction to offer cost per sale advertising and thus merging with its more conventional “banner advertising” that came from both Fastclick and Valueclick. It also survived the dot come bust earlier in the decade thanks to a very strong cash position and very safe management.

    A lot of companies have been hurt by Google in past years but few as clearly as Valueclick. Google has basically outpaced VCLK in every possible measure such as the number of advertisers, number and quality of properties, technology, etc. I have been looking at thgeir offerings for years now trying to see how they were improving and have yet to see anything. Just look at how its main competitor Google has rolled out ads on mobile content, on non-used domains, etc, etc. In the meantime, Valueclick has been unable to generate anything new. Just look at their recent press releases and you will see that Valueclick has not announced anything since July of 2008. In an area as dynamic as internet advertising, it is very difficult to believe.

    Its balance sheet is still very strong as the company has basically no debt and a very strong cash position, which in any era is a good sign, but especially right now. Their problem of course is that competitors such as Google and Microsoft are also in very strong cash positions. Recently, Valueclick has been using a lot of its cash in a stock buyback program. Of course, seeing how much value the stock has lost, it probably would have been better to wait a little longer.

    The major problem lies in Valueclick’s income statements as income has been going downward for one year now in an industry that is expected to be even more challenging in 2009. I cannot imagine Valueclick being able to raise their revenue for now, especially with their different products falling behind competitors as time goes by. Valueclick is profitable and will likely remain so for some time, but as numbers continue to decrease something must change.

    With a strong cash position, it would have been possible to think about possibly looking for an acquisition target but given how they’ve had problems integrating past companies perhaps the better idea would be to get bought. But with consolidation in the industry and companies such as Yahoo and Microsoft unsure of their plans in the near future, it is not easy to see who would be interesting in purchasing Valueclick… for now I’ll be a little patient with VCLK given that with such a strong balance sheet it does not have much downside

    Disclaimer: I do have a position in Valueclick

    Google’s new battleground

    By: ispeculatornew | Date posted: 01.19.2009 (4:00 am)

    While this article will not result in a buy or sell recommendation, it is geared to answer some of the questions that I so often receive, mainly about Google’s growth prospects. If Google is already so dominant in search advertisement, how can it continue to increase its revenues and profits. Of course, this is no simple question and certainly one that top executives at Google spend a lot of time wondering about.

    Since its debut, Google started from a Stanford thesis project to quickly become the most used search engine. Because of its simplicity, the accuracy of its searches and their smart rankings system, they have been able to take control of the market despite very strong efforts by competitiors such as Yahoo!, Microsoft, and Ask.com. Many smaller startups also (and some still do) take shots at Google, but so far, Google has continued to gain more market share, quarter after quarter. In fact, Google is now the starting point for most internet users in the world and at the center of their internet experience.

    But what’s next?

    Google has been going in multiple directions as it is always working on multiple different projects but I would say that there is one main direction that the company is heading towards at full speed. Google wants to go beyond being the center of our internet experience and become the center of our life. That is happening in many different ways and is often described as local search. What is it exactly? The easiest example would be someone searching for a dentist on Google and getting the results of dentists around his neighberhood. Of course, that would have value in itself.

    But what if Google was able to become a lot more? Think about it just a little. Through its acquisition of technology behind Google Earth, Google entered the maps and directions market (slowly taking out Mapquest), now provides GPS technology for free, and is now even in your mobile phone through its new Android operating system.

    How does that translate into more revenues? Today I was looking for directions to go to visit my mechanic and went to Google Maps, got the directions. But as well, in the map just next to those directions, I had directions to a few other mechanics in the area. And in fact, I changed my mind as I noticed that there was one that was closer. Now how much did Google make out of my idea change? Probably nothing.

    But in my opinion, as Google becomes the destination for any local needs, merchants will start to gain interest and see this advertising as a possible way to get new clients. And when that happens, the merchants will be competing against each other to get the most visibility on Google which will of course translate into a new source of profits for Google.

    No doubt, this future market has incredible potential, I don’t think it has any equivalent right now so it is difficult to put into numbers. Sure, we have Yellow Pages that have everything looking for. But what are the odds that you will be taking your big yellow book around with you in your car as you can do with your mobile phone?

    It’s difficult to quantify but I believe it will become the new growth engine in the Google empire….