Archive for May, 2014

Weekend Readings

By: ispeculatornew | Date posted: 05.30.2014 (3:00 am)

new-york-rangers1Congrats to the New York Rangers, the first team to clinch a spot in the Stanley Cup finals:) I’m looking forward to seeing how well they do although I can’t imagine them taking down whoever ends up coming out of the Western Conference. time will tell:) In the meantime, here are some readings of the past few days!

General Readings

US economy shrinking again? @ Bloomberg

Passive Income Readings

Life after QE’s death, is it over? @ TheDividendGuyBlog

Tech Stock Readings

Google to start building cars? @ Mashable
The internet of things @ Ben-Evans
Confirmed: Snapchat founder is a jerk @ TechCrunch

Stocks I Follow Update

By: ispeculatornew | Date posted: 05.29.2014 (3:00 am)

$ZENOne of the more interesting parts of what I do in trading and following tech stocks is updating the list of stocks. Today, I thought I’d do a little update on that front. There isn’t a ton to report but I get a feeling that will soon change.

Stock being added: Zendesk ($ZEN)

zen

ZEN is a SAAS stock. Ever heard of SAAS or software as a service? You might not know the term but you’ve heard about the concept. Basically, any company that offers a software service for which it charges a monthly/annual fee would qualify. The new Microsoft Office for example charges a monthly amount instead of selling the entire cost upfront. It’s a very interesting model and makes it more difficult to value. I did see a couple of very interesting posts that explain how SAAS companies should be value here:

http://a16z.com/2014/05/09/a16z-podcast-valuing-todays-fast-growing-software-companies/

hint: P/E isn’t as useful

The big SAAS stock that I’ve traded so far has been Salesforce (CRM) which I’m trying to see under this new light although I still think that its sector is overly competitive. Last week, ZenDesk, a company that helps companies offer online support to its clients turned public. The IPO was seen as successful and the company is certainly very interesting. I’ll be adding it to the stocks I follow and look at trading it, perhaps later this year.

I continue to believe that like ecsosytems, SAAS companies values are mostly related to their lock-in effect and pricing power. From both perspectives, $ZEN is in a good position from my perspective which I’ll certainly expand on.

Upcoming IPO’s

A few stocks are looking to turn public in the next few months and the one that sticks out is Alibaba. It’s one of the largest internet names out there despite being a mostly China-centric company. Just look at these charts:

ali

I also highly recommend a few readings about the company:

What is Alibaba @ WSJ
Alibaba flexes muscle before IPO @ WSJ
Western companies you’d need to combine to get Alibaba @ Quartz

There has been talk about expanding to the US and that may happen but let’s not kid ourselves either. Alibaba’s future mostly depends on China. I’ll certainly hope to get involved in Alibaba but again my big challenge will be getting decent information about the company. I’ve written time and again about my frustration in getting reliable and solid information about China players such as Baidu (BIDU), Tencent, Yohou (YOKU).

That is also why for now I will not be adding Weibo (WB), a very interesting China-based stock that recently turned public.

Uber or Airbnb?

It’s amazing to see these 2 companies explode as a consumer. As an investor, they might provide opportunities but given they are already being valued at or over $10B, it’s not as much of a bargain. In case you’re not familiar, they’re both part of the new “sharing” economy.

AirBnb makes it easier for home owners to rent out their property all around the world
Uber makes it easier for travellers to book, use and pay for transportation that includes black cars, taxis, etc. It is already expanding into goods deliveries and could end up growing much bigger

uber1

Both companies are leaders in their sector (Airbnb faces little “real” competition).

Jessica Lessin from theInformation made a good case for why AirBnb has a more valuable business that did change my opinion to some extent but I do still think Uber could become much bigger. Its road ahead will be a tougher one and might face more local competition but I do t think it could end up being a huge game-changer.

Two Other companies that are generating significant interest and could turn public:

-Dropbox (another SAAS)
-Pinterest

It’s a very quickly moving scene and I’m loving every part of it. It’s helping make my trading environment that much more interesting but also providing new trading and profit opportunities!!

One More Reason To Focus On Passive Income

By: ispeculatornew | Date posted: 05.28.2014 (3:00 am)

MoneyThis blog is about investing and money management so it’s no surprise that I focus most of my blogging to money-related questions. My quest to build a solid and diversified passive income cash flow. Of course, life is about much more than money. You’ll find a bunch of theories about the importance of money:

-Money does not buy happiness
-Any income over $X does not contribute to more happiness (number I had heard was 70K)
-etc

I agree 100% that there is no perfect direct relationship between the two. However, there is clearly some kind of relationship. Having money helps to:

-travel
-take time off
-live unique experiences
-etc

Of course, it’s easy to think of people that have tons of money but don’t do any of that stuff but I certainly do my best to have those flows help my family and loved ones, that’s the plan anyway:)

Last week, I also saw one more compelling reason to strive for a decent level of passive income:

Living Longer

Just look at this chart from the Wall Street Journal and you’ll see exactly what I mean:

rich

Any thoughts?

chart credit: WSJ

 

New Trade: Long Microsoft (MSFT) & Short AOL Inc. (AOL)

By: ispeculatornew | Date posted: 05.27.2014 (3:00 am)

After a very difficult week earlier this month (thanks Rackspace!), things were back to normal last week and with a long Memorial day weekend, I had a bit more time to go over trade possibilities. I did not see as many opportunities as I was hoping for but did end up settling on 2 rather “original” web plays; The dial-up connector vs the Windows maker:) Both companies have changed a decent amount since those days.

Just as a reminder, you can see those trades here:

http://www.intelligentspeculator.net/livetrades

You can see the numbers for both companies involved in today’s trade here:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg GrowthSales 5Y Avg GrowthEPS 5Y Avg Growth
MSFTMicrosoft Corp40.1214.3113.858.745.63.5310.580.879.38.5617.018.5617.01
AOLAOL Inc37.1220.9814.74-21.545.853.928.63129.9-6.8158.85-6.8158.85

AOL Revenue (Quarterly YoY Growth) Chart

AOL Revenue (Quarterly YoY Growth) data by YCharts

$msftLong Microsoft (MSFT)

In many ways, Microsoft is the “typical” technology blue chip. Thanks to its enterprise business, billions of dollars come in every year which has helped Microsoft develop several solid “side” businesses such as xBox, its cloud services, etc. I’ve also been reading and hearing a lot of very positive things about the company’s new CEO and what his presence will mean for Microsoft’s longer term prospects.

ycharts_chart (1)

Next earnings release: July 22nd 2014

$AOLShort AOL Inc. (AOL)

Ah, AOL is a company that I continue to love betting against a company that has displayed very little in terms of exciting stuff. AOL’s revenues are mostly driven by online advertising which I consider to be very challenging for players not named Google or Facebook. The company has also not had a clear strategy in terms of its future, mobile, etc.

 

ycharts_chart

Next earnings release: August 7th 2014

Disclaimer: No positions

Weekend Readings

By: ispeculatornew | Date posted: 05.23.2014 (3:00 am)

Eric_Schmidt_vs_Steve_JobsI’ve been very vocal about my belief in the play on web ecosystems and published a post that I’d love to hear your thoughts about on SeekingAlpha this week:

Winning the ecosystem war at all costs

Otherwise, here are some readings that you might enjoy:)

General Readings

The future of Goldman Sachs @ Qz
The retirement apocalypse that isn’t coming @ TheBigPicture
GoPro files for IPO @ TechCrunch

Tech Stock Readings

It’s time to kill surface @ Stratechery
Google now the most valuable brand? @ MarketWatch
Why Apple wants to buy Beats @ TechCrunch
App constellations @ AVC

image credit: AndroidandMe

USDP Trading

By: ispeculatornew | Date posted: 05.21.2014 (3:00 am)

Texas-Instruments-logo-designAs I discussed last week, I am now ready to do a small reshuffle of my USDP portfolio. The four stocks that I was going to consider getting rid of were:

KN
ITW
HAS
COP
INTC

KN is the obvious stock to take out. It was a recent spin-off and while it may end up paying dividends at some point, I prefer going for safer picks.

I also want to get rid of INTC mostly because it looks like the dividend will remain at its current level right now which is not what I’m looking for in the USDP.

What am I looking for?

Ideally, stocks that fit all of these:

-history of growing dividends (over 1, 5 years and hopefully longer)
-growth in earnings per share and sales
-solid brand
-stock that will bring diversification to my portfolio

I ended up looking starting my quest by looking for stocks that trade in the US and have the following:

-dividend yield over 2.5%
-earnings per share growth over 5% over 5 years
-dividend growth over 5% over 5 years
-sales growth over 5% over 5 years

That search gave me about 80 results that I needed to trim down from. I then decided to raise those from 5% to 9% and to not consider stocks that had a debt to market cap over 50%. I also took out stocks with a payout ratio above 60%

TickerNamePriceDividend YieldPayout RatioDiluted EPS 5Y GrDvd 5Y GrDVD 1Y GrSales 5Y GrDebt to Mkt CapP/EIndustry
ESVEnsco PLC49.5556.0736.916.9690.3753.8533.710.418.51Oil&Gas Drilling
CVXChevron Corp122.623.4934.8932.039.38109.570.111.89Oil Comp-Integrated
OXYOccidental Petroleum Corp95.583.0234.945.7715.5816.8116.220.0913.63Oil Comp-Explor&Prodtn
CPACopa Holdings SA137.442.823.9726.4154.2143.4118.470.1713.05Airlines
XOMExxon Mobil Corp100.822.7434.3120.89.7510.2612.640.0513.71Oil Comp-Integrated
TXNTexas Instruments Inc45.742.6355.271025.7422.3735.639.460.1121.5Electronic Compo-Semicon

The very positive news of course is seeing that there are several available results. Unfortunately, most of them are in the energy sector where I already have big enough exposure. That being said, Texas Instruments, despite a P/E slightly higher than what I’d like to see, looks like a great diversified pick. I will use it to replace Intel Corp (INTC) which does not look like it will increase its dividend anytime soon.

I will also get rid of both KN and COP and buy Chevron (CVX) instead as it seems to have a much stronger profile. I will be doing that switch at tonight’s close.

Two New Trades ($AAPL vs $ORCL & $NFLX vs $P)

By: ispeculatornew | Date posted: 05.19.2014 (3:00 am)

Ah, the last week was a brutal one as one of my short positions (RAX) exploded higher which as you might have seen in my previous post, ended up being a costly trade. No real lessons to learn here, these things happens and overall, my returns so far this year have been very solid for these trades. As always, you can see my 2014 picks here:

http://www.intelligentspeculator.net/livetrades

I generally only open 1 position on these posts but I’ve been closing positions rather quickly in the recent past and saw 2 good opportunities so why not try this today?:)

You can see the numbers for both companies involved in today’s first trade here:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
AAPLApple Inc597.5114.0712.316.179.24.21139.460.86184.741.2353.24
ORCLOracle Corp41.6917.5813.1410.270.164.049.971.137.812.0919.3

$AAPLLong Apple (AAPL)

The message here is fairly simple. I am a very strong believer and last week’s trade failure (AAPL/RAX) was not because I missed out on Apple. Not much here has changed except that there is very little news in terms of new products with WWDC only a couple of weeks away? Bad sign? Time will tell but as I’ve said over and over, even without new products, Apple is a great value at these levels.

AAPL Chart

AAPL data by YCharts

Next earnings release: July 23rd 2014

$ORCLShort Oracle (ORCL)

I am what you’d generally consider a believer in Oracle and would certainly consider it one of the blue chips to hold when looking at the tech sector. That being said, it makes little sense to me to see Oracle being traded at a comparable valuation to Apple’s. Let’s face it, they face fairly similar downside risk but Apple’s upside seems much higher making this trade extremely attractive.

ORCL Chart

ORCL data by YCharts

Next earnings release: June 20th 2014

You can see the numbers for both companies involved in today’s first trade here:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
NFLXNetflix Inc349.88129.3946.27-6.5121.23.4424.661.275.1726.73N/A
PPandora Media Inc23.43N/A48.92-11.17132.524.062.471.943.54N/AN/A

$NFLXLong Netflix (NFLX)

I love Netflix as a user but I’m not as convinced about buying the stock. I do think NFLX has great management, an amazing business and has everything you’d hope for in order to remain a long term established player. It does trade at a rather high P/E which makes me hesitate but when I compare its valuation to a company like Pandora, it becomes a rather easy trade. They are trading at very similar forward P/E’s despite NFLX giving me much more confidence in its ability to deliver across all metrics.

NFLX Chart

NFLX data by YCharts

Next earnings release: July 22nd 2014

$PShort Pandora (P)

I’ve generally been very negative about Pandora mainly for 2 reasons:

-it depends on other ecosystems (Apple, Google, etc)
-the competition is so fierce that pricing will always make it very challenging for Pandora to significantly improve its profitability

I remain as convinced as ever about both of those points and do think that it makes little sense for Pandora to trade at such high P/E ratios.

P Chart

P data by YCharts

Next earnings release: July 24th 2014

Disclaimer: Long Apple (AAPL)

Closing A Trade… A Bad One

By: ispeculatornew | Date posted: 05.19.2014 (2:45 am)

No matter how you look at it, trading so far has been very good so far this year, and long & short tech stocks. Partially for that reason, last Monday I decided to do something that I usually avoid. I traded a stock a few hours before it was set to announce earnings. Rackspace (RAX) is a company that I’ve been negative about for some time and I had a very successful trade earlier this year. I believed there was more downside and that the stock might tank after releasing earnings. So I shorted it. In the end, the stock rebounded a bit after announcing “decent” earnings. It wasn’t a big issue and didn’t reach my stop-loss. Then this happened:

rax

The result?

rax2

Ouchhhhhhh… Trading always carries some risk and when shorting a stock, it can end badly if some big M&A news is announced.

So that trade will be closed on today’s opening and is likely to be -50%… taking down my average on those trades this year to 6.11%. Still very solid but obviously less so. Oh well, you win some and lose some:)

 

Weekend Readings

By: ispeculatornew | Date posted: 05.16.2014 (3:00 am)

Mark-2Is Mark Zuckerberg just turned 30. Think he’s like the typical 30 year-old? Not that far off right?:) I thought the infographic was very clever:)

General Readings

Why can’t congress pass an infrastructure bill? @ TheAtlantic
4 hedge fund guys making more than all kindergartden teachers together @ Vox
The politics of income inequality @ NYT

Tech Stock Readings

Apple, Amazon and the uncertain future of the book startup @ Gigaom
Why Apple is buying Beats @ Stratchery
Great Yahoo analysis @ Musings on Markets
The web is dying? @ TechCrunch

infographic credit: Mashable

Trading On Secrets

By: ispeculatornew | Date posted: 05.15.2014 (3:00 am)

secretAs much as I love technology and in many ways it makes my life easier, there are also some challenges and grey zones that comes with it. One of my favorite podcasts these days is the Stratechery podcast which discusses tech news. In last week’s edition, they talked about Secret, one of the more hyped apps these days. Basically, this app makes it possible for users to write secrets which their friends will be able to see, share, etc. It is done in an anonymous way which in theory (and in practice) means users are willing to say things they wouldn’t on sites such as Twitter and Facebook.

The app is growing in popularity, especially in places such as Silicon Valley. As you would expect a lot of noise/crap has come out including rumors about new Apple heaphones, etc. It’s easy to get away with stuff like that when it’s unlikely to ever be traced back to the user. However, there has been a lot of “useful” information to come out as well.

For example, a couple of weeks ago when Nike announced it was laying off its Fuelband staff, the news had been shared on secret before being announced.

Future Of News?

If news is now more than ever coming out “new media” such as Twitter and Secret and you often have no way to know if a story is just a rumor, fake or actually true, then how would you ever know if you were trading on “material non-public” information? It’s increasingly challenging to determine what “insider trading” is and I personally think it will only get harder.

A few years back, having material non-public info required talking to a highly ranked executive. These days, thanks to social media, a very large number of employees with sufficient information are able to get the story out anonymously. One of many challenges for potential traders of course is figuring out the value in such stories and the odds that they are accurate.

Do you agree with me that these anonymous apps will make life very difficult for investors, corporations, regulators, etc?