Archive for May, 2010

New stock pick: Long Google (GOOG) & Short AOL (AOL)

By: ispeculatornew | Date posted: 05.31.2010 (4:03 am)

Google has been front and center on this blog in recent weeks. And this week is no exception with a new stock pick and a couple of upcoming posts about the search giant.

Is it because I have fallen in love with Google?

Maybe. But I am also trying to understand Google’s dramatic decline so far in 2010. Sure, Google lost a major battle in China and is almost out of the market. But it’s not like this market had made a major contribution to the company’s revenues and profits.  And Google does have a lot of support among the US government, so even that story could end up turning around. But even if it doesn’t, Google remains a company that has so much more potential than AOL in my opinion. It is behind what could arguably be the best operating system for mobile phones (and some say the fastest growing), has just started a global alliance with Sony to launch Google TV, is the king of online video thanks to Youtube. There is one missing piece right now, and that is social web of course. But a company with the financial resources of Google has many ways of solving the problem. Right now, the solution seems to be pushing hard on Buzz. But it could at any point try to get a deal done with Twitter (Facebook does not look for sale right now).

No… I’m not a fan of AOL…

AOL on the other hand is an internet company that I have been bashing on for a while. I did have some more positive words for Yahoo in this week’s edition of IntelligentSpeculator Premium (although I remain short) but AOL continues to look doomed in my opinion. I would compare AOL to those old airlines like United Airlines & Northwest in the airline industry. They can always try to reinvent themselves but if the overall structure of the company is old and non-competitive, they will never catch up to newer and better competitors.

Could anyone argue me about the fact that Google is a much more dynamic company than AOL? Seriously? Even numbers don’t lie. Revenues for Google are up 8.51% over the last year. Not anywhere near what is needed. But compare that to a 21.81% decline for AOL. One of the main criticisms made towards Google is how dependent it is on Online Advertising. That is true but it is even more so for AOL which is So how can the P/E ratio be as follows:?

Price/Earnings Ratios

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
MSFTMicrosoft Corp54.3522.6617.78-1.357.7749.691.2211.443.91-3.99
EXPEExpedia Inc114.352.6317.1-7.8315.774.1432.371.1651.2618.34N/A

That is such a small difference for two companies that are a few worlds away from each other. Google has a lot not going well but many different things could turn around. As for AOL, the main thing that could take off is the Local Patch network. But that is not a revolutionary idea and it will face stiff competition from Google, Yahoo and others in the local web.

Financial Ramblings

By: ispeculatornew | Date posted: 05.29.2010 (3:35 am)

Spain became the latest European country to have its credit rating downgraded yesterday, and by far the most important.I highly recommend reading the first link, from ZeroHedge. Let’s just say it makes it very difficult to be a big believer in the old continent’s economic system.

Here is that link with others I liked this week:

Europe: A continent of lies and broken promises @ ZeroHedge
CBOE launches options on VXX & VXZ @ Vix and more
May 27 Stock Market Recap @ TraderMike
Too pig to fail @ Ritholtz
What’s the difference between an investor and a trader? @ OnlineInvestingAi
Five dividend stocks to buy on a drop @ DividendsValue
Are you financial sexy? @ MillionDollarJourney
Running a company: Making a plan @ TheFinancialBlogger
How much time do you take to manage your personal finances? @ GreenPanda

Quick news – May 28 2010

By: ispeculatornew | Date posted: 05.29.2010 (3:19 am)


Rumors are that Verizon (VZ) will carry the Apple Iphone (AAPL) for the holiday season
Long lines around the world as Apple’s (AAPL) Ipad was released in 9 countries
Facebook made the top of the list of Google’s most visited websites
Valueclick (VCLK) rated “Average” by Caris & Company

Google trying to get US government support?

By: ispeculatornew | Date posted: 05.28.2010 (3:21 am)

As Google has grown more important in the digital economy, it is poised to encounter an increasing amount of interactions with the world governments. Already, Google has had confrontations with the Vietnamese and Chinese governments this year and is now at odds with the European governments over privacy issues. Google is also battling on many fronts including operating systems for pc’s, phones, selling digital books, computer digital drives, etc. What does all of this mean? It means that increasingly, Google has to discuss and negotiate with the US government. Having Washington by its side on domestic but also international matters is maybe not priceless but it’s not that far. Imagine if Hillary Clinton and the US government had not demonstrated support for Google in its battle with China? I’m not saying there would have been a war but things certainly could have turned a lot more nasty.

How Google is trying to get Washington and States on its side

Lobbying: As much as Google would like to find an original “Non-Evil” way to get support at the government, the best way to get it, as it has been for a very long time, is to spend money lobbeying. Google has certainly been very active. Compared to last year, Google increased its lobbying spending 57% to $1.3 million.

How is it spending it? According to this interesting article from the Washington Post, not so conventionally. I’m not certain why Google chooses to take this approach about privacy and it certainly has not helped gather support of the government. Google has always been about finding a smarter way. When it did its Ipo, Google was not conventional and the way it is dealing with bureaucracy has also been quite innovative.

Public Relations (PR):

This week, Google published a comprehensive report about its role in the US economy, broken down state by state. It gives itself credit for $54 billion of economic activity and even breaks down the calculations by state in the report is published. That is quite impressive, very interesting and very useful…for Google. With this report, Google can go to any business or individual and prove why it should be “helped”, “protected”… Who knows how exactly it will be used but I would say that it is probably a good PR move. I would imagine that most companies would like to publish a report but deem it too much of an effort. Of course, Google being the king of information that it is, the effort required is much smaller.

The latest efforts by Google to do well (and gain public appreciation) is in the environment field. Sure, building wind facilities could be cost efficient but there is certainly more to that story. Do you think that its recent announcement to be a carbon neutral company is only about “Doing no evil”? Today, Google joined environmental groups asking for laws to be passed regulating carbon emission. I do like Google, I really do. But I don’t think these are mainly about being a “good company”. There is nothing wrong with that of course, far from it, but I think it’s important to note how much importance Google is currently giving to the Government and Public support.

Why do it? (reverse negative feelings? political power?, customer loyalty?)

So you get the point, Google is doing its best to be in the best possible light for both the general public and the government, here are the reasons I see behind it:

General Branding: Let’s face it, Google is a brand loved around the world and it certainly has its benefits
Avoid government interventions; Microsoft and now Apple have faced issues regarding possible abuse of power, Google is doing its best to avoid being the next target
Public battles: Google has taken sides in a few battles including for example net neutrality. The better the perception of the company, the more chances its voice will be heard loud
International support: As Google continues to struggle with quite a few foreign governments, support from the US government is very valuable
Acquisition power: Google is very powerful and when it makes acquisitions, the chance that they end up being blocked is smaller if it does not seem “evil”
Others: let’s face it, the guys running Google are very smart and they probably have quite a few ideas in mind when they do such PR campaigns

Quick news – May 27 2010

By: ispeculatornew | Date posted: 05.27.2010 (3:45 pm)


Research in Motion (RIMM) will be launching a $150 million venture fund in China
Amazon (AMZN) will start selling Kindle’s in Target stores
Goldman Sachs (GS) issued a recommendation to buy Microsoft (MSFT)
AOL (AOL) is planning to spend $50 million on its Patch websites network
Microsoft (MSFT) raised to Outperform at FBR Capital Markets

Apple (AAPL) leaps past Microsoft (MSFT) as the top tech company

By: ispeculatornew | Date posted: 05.27.2010 (4:01 am)

It would have been deemed impossible a decade ago. The tiny computer company behind Apple computers competing with the King of PC’s, the company behind cash cows such as Microsoft Office and Microsoft Windows. Microsoft seemed like a train that no one could stop and it was so bad that Microsoft had all kinds of issues with antitrust regulations. As you can imagine, those do not come up when things are not going well and they were going very well for Microsoft. The company had superior products and was using them to gain the edge everywhere else. Remember how Internet Explorer used to be the only internet browser worth mentioning. How things have changed…

Apple becomes a multiple trick company

Back in those days, Apple was about one thing…Mac computers. Since then, Apple has added a very very powerful set of devices including the Ipod, Iphone and Ipod. They have all been major hits and have taken Apple beyond what anyone could have even hoped for. Apple is now the top tech company in the world in terms of market cap and the third biggest company out there behind two oil giants.

Here are the top companies in the US in terms of market cap:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
TRIPTripAdvisor Inc65.5751.0626.53-23.3819.743.089.721.5110.3624.16N/A
YELPYelp Inc21.75N/A26.7-26.3945.63.549.191.267.3659.08N/A

Who is next?

Is it by chance that the same day where Apple reached this incredible feat, we found out that the US government was looking into the way (abuse of a monopoly) Apple was operating its Itunes store? Probably not. There seems to be something that says that the biggest tech company has to be abusing of its position. It’s always easier to attach the king of the hill and Apple certainly looks like a great target. Competitors have been putting a lot of money and effort into competing with Apple but with no success yet. However, I would not dismiss the competition as we easily could have done the same with Microsoft. It did seem unbeatable not too long ago.

So among those that can challenge as the top tech company, only one comes to mind right now; Google. It is ranked #18 in the world and #3 in tech companies and is probably the odds on favorite to take over as the top tech company… Of course, I did admit having fallen for Google so maybe I’m not seeing clearly here… Thoughts?

Quick news – May 26 2010

By: ispeculatornew | Date posted: 05.26.2010 (4:30 pm)


Apple (AAPL) surpassed Microsoft in market cap today
Yahoo (YHOO) CFO sees annual revenue growth of 7-10% between 2011-2013
Apple’s (AAPL) Itunes is being looked into by the Justice Dept for its practices
Quinstreet (QNST) upgraded to “Outperform” by Raymond James
Yahoo (YHOO) has entered into an agreement with Zynga to integrate its games throughout the network

Best Oil ETF’s & Best Oil Stocks

By: ispeculatornew | Date posted: 05.26.2010 (4:17 am)

Trading crude oil has certainly been entertaining in the past decade or so and this year has not been different. Wild unpredictable swings, tons of volume, volatility, global economic uncertainty and unpredictable elements almost every single day… they all come together to form the trader’s dream. Even though oil has generally been down so far this year (see the graph just below), there have been numerous opportunities to make money off of the black gold.

And as tragic as the recent BP oil spill has been, it has provided some trading opportunities. It is unclear how damaged BP will come out of this public and ecological disaster. BP has lost 20% more this year than most of its big peers. Is that too much? Its difficult to say of course with the penalties still very much undetermined. But there are possibilities.

Another possible trade is the strong hurricane possibility. The hurricane season is now a few weeks away and the could very much be what is needed to take oil back over 100$.

Historically, crude oil has always been very volatile but had started to seriously take off in the past few years as demand from China, other emerging markets as well as a lot of speculative flows made their way into the crude oil market. It’s unclear how much of it was justified but it’s safe to say that probably none of us expect oil to return to 40$ in the near future. Oil continues to be cheap because of the deep world recession but just look at this graph from Wtrg.com and you will remember exactly how high oil had gone before the economy tumbled:

So let’s start off with a general chart of the price of Crude Oil, in 2010:

As you can see, Crude Oil is clearly down and certainly the trend is towards more losses… The question of course is for how long it can keep up.  Let’s start off by looking at the Top Oil ETF’s and how they are doing so far in 2010:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
PYPLPayPal Holdings Inc36.8336.0821.082.4315.2411.24N/A7.57N/AN/A
RAXRackspace Hosting Inc19.822.5421.36-18.0916.917.791.1612.6420.8330.89

Not a huge surprise to see that short ETF’s have been at the top, especially considering the rapid decline since the start of May

Next up, we will take a look at the large caps which right now in the world of oil reminds us of how painful things have been for BP. Just take a look at this year’s chart for the British company:

And now here are the Top large cap oil companies, as you can see while BP has taken quite a hit, it’s not the worst so far in terms of returns, surprisingly:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
PCLNPriceline Group Inc/The1069.121.615.54-17.7124.274.34169.931.13161.4125.9741.93
EXPEExpedia Inc99.933.9717.52-22.5320.84.1118.81.1244.7114.6114.5

As you know, in the commodities world, the largest companies are rarely the Top performers, so here are the top ones so far this year among the top 500 Oil companies:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthBook ValueBetaRevenue/ShareSales 5Y Avg Growth
YELPYelp Inc15.23N/A19.35-46.6745.69.191.157.3659.08
FBFacebook Inc101.9178.9124.54-3.543.8215.540.986.451.72

And finally, just in case you are serious, the worst performers.. this might help BP feel a little better…

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
AAPLApple Inc93.999.999.34-10.527.8623.131.1240.6225.5634.76
EBAYeBay Inc22.4910.7810.74-19.65-2.255.550.957.113.6536.71

Quick news – May 25 2010

By: ispeculatornew | Date posted: 05.25.2010 (3:56 pm)


Walmart (WMT)
has cut in half the price of the Iphone 3G’s in its stores
Apple (AAPL) is ramping up production of its Ipad to 2.5 million per month
Google (GOOG) released a new version of its web browser, Chrome
Amazon (AMZN) CEO Jeff Bezos said a color Ipad was not yet ready for prime time
Priceline (PCLN) raised to “Buy” at Soleil Securities
Nokia (NOK) and Yahoo (YHOO) announced a partnership covering email, IM, maps and navigation across mobile devices
Yahoo (YHOO) also announced a partnership with IAC Interactive’s (IACI) match.com which will become the exclusive online dating solution on Yahoo.
Google (GOOG) disclosed the portion of its adsense revenues paid out to publishers for content (51%) and search (68%)
Morgan Stanley (MS) says Apple’s (AAPL) shares could reach 400$
Yahoo (YHOO) acquired what is deemed the “Asian Foursquare”, Koprol
Dell (DELL) will be launching an Ipad competitor in June

The dangers involved when falling in love with a stock…

By: ispeculatornew | Date posted: 05.25.2010 (4:36 am)

I guess it happens to everyone at some point doesn’t it? Anyone who is active in the financial markets runs the risk of falling for a stock. Imagine walking into a bar and seeing that stunning blond girl. You might also meet her through a friend, neighbor or even a random encounter. You know what they say, “Love is Blind“. That is certainly great and to a certain extent, something we all hope to live at one point in our life. But I would bet each one of us knows at least one person in an unhealthy relationship. There are many many reasons for a relationship to be unhealthy other than the obvious physical & verbal abuse. Sometimes, we are with someone who does not make us happy (isn’t that the end goal?) but yet, we are so blind that we cannot look at the situation with any objectivity.

The same can happen in the markets. At some point, we read about a certain company, or hear about it from a friend, neighbor or even hear someone mentioning it. At this point, there is that danger, you might be falling for that company or it might even be love at first sight. It can become unhealthy financially and can have very adverse consequences and even lead to a poor retirement in extreme cases.

Symptoms

Think you might have fallen for a stock? Here is a quick checklist to know if you have fallen in love for a company/stock, which we will name XXX:

1-Each time you read about XXX, do you only look for the positive aspects?
2-Do you look for positive news when XXX releases financial results?
3-Do you keep buying XXX when its price declines because “you know” it will rise back up?
4-Do you try convincing your family and friends that XXX is the right one and that they should give it a fair chance?
5-Can you imagine yourself getting out of the relationship (selling the stock) if it went up 20-30%? Or are you certain that it will be a lifelong relationship?
6-Do you feel emotionally attached to XXX?
7-Do you still hang on to those good old moments when the stock made you a few dollars and gave you ideas of breaking the bank?
8-Do you have trouble admitting that getting involved with XXX might have been a mistake from the start?
9-Is XXX maybe more of a one night stand that you need to get in and out very quickly instead of holding on to (I’m not referencing anything more here… hahaha)

Google

The reason I wrote this post is because I fear this has happened to me. You see, I included Google (GOOG) in my 4 stock picks for 2010 and have also picked the company in 2 trades this year. They have all gone very very bad. I continue to see and even write about all of the impressive business aspects of Google and how it will have such an important impact on the economy. That might be true but how many times will I pick Google before coming to the sad conclusion that maybe my relationship with Google is not healthy and that I should move on? I’m not saying I’m there yet, but it’s approaching that point… I think that as difficult as it can become, it is important to take a break at some point. In the financial world that means selling your position. When you no longer own the stock, it is a lot easier to get a more objective view of its value… Right now, I have no positions on Google (other than the 4 picks for 2010, which I cannot change anyway) and so it is easier for me to see Google as any other company rather than the one that makes me feel so good:)

Consequences

-If you stay in an unhealthy relationship, you might have trouble committing yourself in the future when the right one comes along
-You might suffer many more losses than what you can sustain financially and emotionally. The losses over a lifetime of investing can be incredibly high
-You will have trouble having faith in your future relationships

What to do

The first step, as you have maybe guessed, is to admit to the problem. Personally, I am aware that it might be a problem although I’m not convinced just yet. So here you go, the steps involved:

-Admit to the problem (falling in love with xxxx)
-Look at all the of the symptoms and impacts on your life
-Imagine yourself in 10 or 20 years, ruined by this company, imagine what your life would look like if you put everything into XXX and it failed…
-Distance yourself, for some time. Cut all contact and take the time to rethink what XXX is truly worth
-If after a good break you think that XXX is truly the right one for you, go back to XXX but with a clear plan and exit strategy if things turn sour once again

And you, have you ever fallen in love with a stock?