Archive for April, 2017

Not Buying The EBAY ($EBAY) Turnaround Story

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

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

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

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

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)

Closing 1 Trade (FB & PYPL)

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

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

The Warning Signs Advise Investment Caution

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

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.

 

Harald Seiz CEO of Karatbars International: Make Gold Great Again

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

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