Archive for September, 2009

Stock picks – Q3 Update – Back on top

By: ispeculatornew | Date posted: 09.30.2009 (4:39 pm)

baiduI can’t say I am disapointed to see the quarter come to an end as I am back on top of the rankings, with a comfortable lead. Actually, I’ve been fortunate enough to have been leading most of the year but I did slip into 2nd place long enough to actually not be first in Q2.

Choosing picks for an entire year will always be quite a challenge as so many elements can change. As I have discussed in the past, if I were able to update my positions right now, I would probably get rid of at least 1. But overall, I’m quite satisfied with the return and obviously with the ranking. I do feel like I was less aggressive than many other participants, especially those that went into these categories:

-Commodities
-Leveraged ETF’s
-Small caps

Many different strategies can work and I guess it’s logical to be aggressive to try to win but I did try to go for positions that I believe not to have much downside risk. And while for example I thought oil was going to rebound, there was just too much uncertainty in the world to actually think about taking all 4 picks around oil. So I diversified in a way. Will it end up being enough to win? Tough to say but let’s say I prefer being in my position right now! Without further wait, here are the returns of my 4 stocks:

The picks

USO – +9.34% – Like many, I had imagined that if the world economy could fight its way out of the recession, oil would surely benefit and while it might not reach the levels of a year ago, it seemed like a safe bet to expect a rise in the price of the “blood of the world”. I’m a bit surprised oil did not pick up more steam but I’m confident with my position and do think it has more upsize in the remaining quarter. It also turned out to be a bit of a hedge against those other bloggers who took oil stocks (although those who did usually picked a few picks so probably would not have helped if oil had been up to 150$).

uso

GLD – +14.25% – This was another fairly safe pick as I did believe that the uncertainty regarding the world economy would help take gold to new levels. As well, with all of the money that was pumped into the systems, many still regard inflation as a significant threat and gold seemed like a good bet in 2009. It has not proved as profitable as hoped but that is mainly because the stock markets have moved much higher and my two next bets were the ones that would really profit from a market recovery

gld

Technology picks:

Technology is probably the area I know most about and so I did choose two companies that I believed to be undervalued, Baidu (BIDU) and Ebay (EBAY):

EBAY – +69.13% – Ebay has been picked on for a few years now but 2008 was a very tough year for the stock and as I had wrote, I believed that most analysts were not picking up the value of Skype & Paypal when evaluating the stock. When the stock market recovered, Ebay decided to sell a majority portion of its Skype business, thus obviously “helping” investors notice how much the business was worth. Ebay even mentioned the idea it could sell Paypal. While that does not excite me very much in regards to Ebay’s long term future, these actions certainly do help Ebay’s current valuation.

ebay

BIDU – +199.13% – Out of all picks made by the bloggers, this is the winner so far! Bidu has nearly tripled as it continues to hold its ground against Google in China. It is now even thinking of expansion in Japan. One of the big reasons why I think Baidu had been undervalued was that many analysts believed that Baidu will end up having legal problems because of many of its activities. As I have written in the past, I think it’s important to remember that Baidu operates in a very different environment and for the moment, Chinese authorities have much bigger issues to worry about. At this point, I do not have many expectations for the 4th quarter for Baidu considering its already very impressive ride this year.

bidu

So these 4 picks give me a 73.05% return, here is the ranking so far. As other bloggers publish their articles, I will add links towards their analysis:

1-IntelligentSpeculator    73.05%
2-TheWildInvestor 56.78%
3-FourPillars 44.26%
4-Wheredoesallmymoneygo 43.01%
5-TheFinancialBlogger 24.49%
6-DividendGrowth 11.51%
7-MDJ 8.49%
8-MyTradersJournal -3.16%
9-ZachStocks    -13.17%

Ever heard of the name Ashley Alexandra Dupre? Probably not.

By: ispeculatornew | Date posted: 09.30.2009 (5:00 am)


But when you hear about former attorney general Elliot Spitzer’s high priced hooker, then you will probably have memories of hearing about the story. When it is said that no advertising is bad advertising, she would seem like the ultimate test wouldn’t she? She was a prostitute, sleeping with a married, high profile man. As far as getting a good reputation, we could say she had a disastrous start right?

But turns out, she is now doing better than ever. She has her own website, is launching her first record, is being invited to celebrity events, is being lured to write an autobiography, etc. I find it very interesting to see how well she is doing and to me, this is one of those ultimate examples that one of the only things worth doing for a corporation on the internet is to get attention. She has had some success with her song releases so far, giving interviews to the NY Post and would be sure to sell millions if she ever does write that book.

We had discussed Puma’s new stock index and if it would really pay off. I do see links between the two stories. One sure thing is that Puma cares more about getting attention for now than about actually selling clothes and that is probably a clever strategy. Will Nike and Adidas one day be playing catch up on the web or regret not being aggressive or edgy enough?

In my opinion, too many corporations worry about the impact of different possibilities on the internet when in fact, it is important to live on the edge, in order to even have a shot of being talked about, gaining attention and hopefully going viral. In a past column, I had discussed how I believed Pepsi was using the web much more efficiently than Coca-Cola and I believe it can have an important impact. Companies like GoDaddy are able to generate a lot of buzz and get their name out there while others spend many times more on marketing without much results…

A more “entertaining” way to follow stock markets

By: ispeculatornew | Date posted: 09.28.2009 (5:00 am)

It would have been incredibly brilliant if it had launched a year earlier but is still a good enough idea to generate buzz and excitement. This is a perfect example of an attempt at viral marketing. The objective of course is to get people to talk about the video as well as the idea. Then, of course, viewers will either send links to the video by email, Twitter, Facebook or even discuss it on blogs such as this one. It is an innovative way to get more eyeballs on its website.

I would say that this video has a good shot at becomming a hit and with close to 200,000 views on Youtube alone, without even having launched the product officially, chances are good that this will be a multi-million visitor idea, and probably considered a success. The advantage of course is that the costs are so slim to generate such a video.

Now the big question of course is if the they will be able to make a decent return on their investment. Chances are they will. Right now, they are collecting emails on their website as well as getting their name out there which as you will see on my post Wednesday, is always good. The saying that there is no “bad promotion” is certainly as true as ever in this internet era.

What are your thoughts on the Puma Index?

Financial Ramblings

By: ispeculatornew | Date posted: 09.27.2009 (10:02 am)

oil-and-gas-well-at-sunset6We had an interesting week in the markets with lots of action but most markets ending up down for the week and some already talking about a new crash? I’m not a big fan of the theory, but it should make next week very interesting!! Here are a few of the more interesting reads from last week in the blogosphere:

-TFB discusses the top Canadian dividend stocks as well as positions 11 through 20!
-Zach discusses credit card defaults rising and rising!
-A good post on GLBL about getting personal finances back under control
-MDJ: What is important about having m0ney for you?
-I did talk about fixed income ETF’s look at a trade on one of them here🙂
-How emotions affect fixed income investors by Canadian Capitalist
-A great article by FP..how to find and select a tenant!
-Will interest rates stay low forever by TCT!
Citigroup suing Morgan Stanley over Credit Default swap agreement..!

Ebay to do the unthinkable?

By: ispeculatornew | Date posted: 09.25.2009 (4:41 am)

ebay-logo1In the start of the year’s stock competition, I had picked Ebay as one of my four picks and while it is not my best pick, its 68% return so far in 2009 has been impressive, especially considering how it continues to make bad business decisions. While the main problem with Ebay is that it seems to lack innovation and while it had many superior products, it is slowly but surely losing its lead in its different segments.

At the start of the month, I suggested it was time to dump Ebay after it decided to part with most of its Skype business. Now, to my surprise, Ebay CEO John Donahoe confirmed he was open to spinning off Paypal, which in my opinion is probably the most attractive part of the company at the moment. “When I feel the business will be better off separately, we’ll do what we did with Skype,” To even publicly talk about this is worrying long term for the company. Of course, this could help the stock short term as there is no doubt that there would be a long line of potential buyers for Paypal if Ebay was to decide to sell it.

The problem though is that discussing it publicly will probably not help inspire innovation or encourage those working at Paypal. Actually, I do not see much upsize in going out and saying this and would say this was probably a mistake by the EBay CEO.

One thing that is certain though is that if Ebay does actually decide to sell, I’ll be thinking about holding Ebay as the company looks for buyers.. but be sure that I would drop out as soon as the sale is complete, there will not be much value left in the company if ever they do part with their electronic payment segment which has been responsible for much of Ebay’s growth in recent years.

Feel like throwing money out of the window?

By: ispeculatornew | Date posted: 09.23.2009 (5:00 am)

It is quite interesting to see funds flow in and out of ETF’s. However, it is often difficult to compare ETF’s as they often do not target exactly the same returns. But in some cases, several ETF’s track the same index but with very different charges. Why would you invest in a fund that charges over twice the fees if it targets (and pretty much meets) the same returns before fees. A very interesting case is taking place in the emerging market ETF’s.

One on hand, there is the very known EEM, managed by Ishares, that charges .72% of fees, which is high but seems reasonable considering it invests in many different illiquid markets. EEM has $31.7 Bn under management, a very impressive amount. But then consider Vanguard’s VWO fund which tracks the same index, the MSCI Emerging Markets Index. It charges .27% of fees, not even half of the fees charged by Ishares. Since it is not as known, VWO still has fewer assets under management, at $22.7 Bn.

The question of course is why someone would choose to invest in EEM when in fact you could pay fewer fees for the same return? One reason could be that you think one manager will not be able to achieve the promised return. In this case, both companies have a very solid reputation, both funds have a good history and you can look at this graph, there is in fact almost no difference between the return of the two funds.

You can take a look at the differences between the two here:

eem_vwo
As you can see, they are pretty much identical so paying 0.45% more of fees does not sound like a good deal. There are rumours that Ishares will reduce the fees it charges later this year on EEM but for now, with as the largest emerging markets fund, it has little incentive to actually do so. If two funds offer the same return but one has a better reputation, strangely, many investors fly to that one.

Of course, I would not switch based simply on fees to a new and unproved company. But Vanguard is far from that and I will be the first one to buy VWO the next time I buy emerging markets ETF’s. I have stated numerous times that I am a fan of Ishares, but not fan enough to throw money out of my window… Of course, if you would like to do so, be my guest, I’ll be sitting outside to collect:)

eem_vwo2

Internet Display advertising will explode…

By: ispeculatornew | Date posted: 09.21.2009 (5:00 am)

online-advertisingI am fairly confident that Google’s latest move could be a big one. Google announced today that it would be opening up an “ad exchange”, a digital market place for display advertising. This is a major move because up to now, advertising on the internet has been mainly of three kinds: search ads, text ads and lead ads:

-Search ads: the most obvious one and one that all internet ussers have used in a way or another. When searching on Google or other search engines, you will see two types of results; paid and unpaid. While the unpaid ones would generally be those considered the best match for your search, paid ads are ads that individuals or companies pay to have displayed next to a search result
-Text ads: There exist many types of ads but generally, advertisers use a third party to display text ads on websites. Those ads are paid either by click or every time they are displayed. These have been used in countless ways with users often not knowing that they clicked on an ad.
-Lead ads: These can be either images or text ads but are a specific category of ads where the advertiser will be paying for specific actions. For example, Amazon has such a program where they will pay website owners a percentage of any sale tat is made by a customer referred by that website. There are many ways to go about this but it is obviously a very important area on the internet.
-Another type of advertising that should have caught up more quickly but has not is display ads. These ads are more of the type of ads you would see on tv where advertisers are not necessarily trying to get an immediate action. A good example would be an for food, a restaurant like McDonald’s. Right now, it would be a bit difficult or tricky for a company like McDonald’s to advertise on the internet as what they really want is to show their logo. But without an efficient marketplace, it becomes very expensive to do so because a company like McDonald’s was stuck with going directly to specific websites such as Yahoo or CNN. By doing so, they would be paying a very high price.
But in my opinion, Google will do to display advertising what it did to search and text advertising; make it efficient. Basically, by allowing thousands of publishers and advertisers to get started easily with a very small budget, it makes it possible for smaller companies to enter the area thus making the entire pricing a lot more competitive and transparent.
It might not have been possible for a 1 man company to pony up 50,000$ to advertise on Yahoo, but with the Google Ad Marketplace, I believe that it will become a lot easier to start small with 100$ for example. Then, if the company can actually make a profit with that investment, it will increase its investments over time.
So yes, I do believe that this launch is a big thing and finally a good use of the doubleclick technology it purchased over a year ago when it purcahsed the company. I would imagine that within 12-24 months, this will help Google become an even more important central for advertising….

Is the worst to come for emerging countries?

By: ispeculatornew | Date posted: 09.18.2009 (5:00 am)
polandflagIt has been written about somewhat but continues to be ignored by most.. There will be consequences to the massive actions taken by worldwide governments to avoid the collapse of the world economy. Governments around the world have spent or promised tens and hundreds of billions of dollars to stimulate their domestic economies. Of course, since governments main revenues are tax inflows they receive less revenues when the economy slowdowns. Add to that spending that increased and it is easy to imagine how not only the American government is running huge deficits. Poland, the most important country in Central/Eastern Europe by many measures has announced it projects a $20 billion deficit in 2010.

When governments run deficits, they must of course borrow and in almost all cases (except for the very very poor) that is done by issuing debt (bonds). So if all governments are issuing record amounts of debt at the same time, there can be issues to actually sell that debt with two major consequences:

-when the regular bond holders are done buying, governments must attract new ones, generally by raising the interest rates paid which for some countries can be manageable but for some others creates critical situations

-there will also be many countries that will simply be unable to sell their bonds because there is so much offer compared to the number of buyers. There have been signs that it would start to occur sooner than later but it still came to a surprise to many to see Poland being unable to sell over half of its bond issue last week. BNP Paribas has recommended selling Poland’s bonds which caused even more panic in the Central Europe country. “This is a direct consequence of a very dangerous fiscal outlook presented in the 2010 budget draft. We recommend selling Polish bonds across the curve”.

Poland has not been performing greatly in this recession but it is also far from the worst so if they are having trouble selling their bonds, are other emerging countries in trouble? Other countries in central and eastern Europe as well as in Asia are in much more critical situations and might need some help sooner rather than later.

One solution that has been discussed has been for organisations such as the World Bank and the IMF to provide loans for such countries but again the question remains; where will the funds come from? These organisations have been funded by the same countries that are suffering from deficits in the past few months/years! It will be interesting to see how this and future crisis will be dealt with but there is probably a lot more pain to come…

Adobe late in the game…

By: ispeculatornew | Date posted: 09.17.2009 (5:00 am)

adobe-logoAdobe just made a very surprising acquisition yesterday as it confirmed it had agreed to buy Omniture Inc for $1.8 billion. The announcement was met with skepticism as the stock lost 6,4% of its value during the day despite the Nasdaq being up 1,42%, quite an underperformance. As in any move, there are many reasons for the major drop.
First off of course would be the very expensive price Adobe ended up paying as it paid 24% over Thursday’s closing price of Omniture, which honestly I do not understand at all. It seems improbable that Adobe had to pay such a premium for a company that did not seem to have that many potential acquirers running after it. There are obvious reasons to pay a little over market value in order to be able to close the deal more easily. However, paying 24% over the price seems like an excess.
The second and even more concerning reason in my opinion is the logic behind the purchase. Omniture provides expertise that will help Adobe enter the analytics area. Michael Olson, a Piper Jaffray analyst said that Adobe was trying to diversify beyond being a just a maker of development tools. That could make sense. But entering the analytics area where it will directly compete with many other high profile competition does not sound like the best decision Adobe could make. When speaking about analytics, we increasingly think of Google which offers a very sophisticated product free of cost. Of course that makes it very difficult to compete. If the goal was to help its customers get more accurate information about their advertising performance, it would seem to me like there are cheaper ways to get this done than doing an acquisition….
Once more, this is probably a panic move as Adobe saw its revenues decline 21% in the period that ended August 21st.. I don’t know about you but personally, I’d stay away from a company that seems to be this desperate..
adbe1

Did Apple stumble and create the Iphone killer?

By: ispeculatornew | Date posted: 09.16.2009 (5:00 am)

apple_iphone_2Apple is a brilliant company, no doubt about it. But what has been coming out of the Ipod touch in the past few days is truly fascinating. Maybe Apple has an end play for this and it might come out on top but it is not exactly clear that it will. To get you back into context, Apple has two main products right now, the Ipod Touch and Iphone. The main difference of course is that the Iphone gives you the ability to make phone calls. But for that benefit, users must pay more upfront (usually around 100$) but also sign up to a plan that will cost between 70-100$/month for 3-4 years. Expensive isn’t it?

So does Apple care?

Obviously, this makes a huge difference for Apple as they not only receive more money when the purchase is made on an Iphone sale but even more important is the money that the phone company (AT&T in the US) gives to Apple, a portion of what the user will end up paying the phone company over the life of the contract. So Apple has a major incentive to sell as many Iphones as it possibly can.

applelogoBut what if you don’t need an Iphone…?

It’s not easy to figure out if Apple expected this to happen but a few applications have been submitted by Skype, Google Voice and others that would make it possible for users to make phone calls through their Ipod touch using an internet connection. Initially, Apple rejected those applications, which was not that surprising given its possible impact on Iphone sales. But the FCC made a surprise intervention which has forced Apple to reconsider such applications. Skype is now the most downloaded free appliation on Itunes and Google is hoping to gets it application available soon.

But it’s still not an Iphone…

True, an Ipod touch user still has limited access to the phone as it must be connected to the internet and thus be in a Wifi zone. But with Wifi zones spreading quickly and many users having their own Wifi at home, it is becomming a possibility to switch from an Iphone to an Ipod touch. Chances are that this will not happen overnight but I would say that Apple might have the perfect product to avoir buying a smart phone such as the Iphone.

Voluntary or not??

skype1There are problably very few people that truly know. Did Apple know this would happen but figure out they would sell more Ipod’s in the long run and could even become a good way to get non Apple users to make the switch. As well, if that was the plan, going under the radar the way they did was probably an easier way to do things than announcing its intentions which would have created numerous companies, especially the current cell phone carriers.

It will be interesting to see how things evolve over the next few months/years and what will happen with the Ipod touch.