Archive for March, 2009

Yahoo(YHOO) – more confusion ahead???

By: ispeculatornew | Date posted: 03.18.2009 (4:00 am)

yhoo1A few years ago, Yahoo had emerged from the dot com bust with a little confusion about what it was. It has always been a bit complicated to explain what Yahoo is about. Google (GOOG) clearly has stated its objective to “Organize the world’s information” and generally has been consistent with that message. Yahoo on the other hand has many different goals, mostly related to being a web directory but also offering various services related to dating, finance, etc. Many of the users do not even know that the service they are using is powered by Yahoo.

However, one thing that was clear from a few years ago was that it was not in the business of producing content, only delivering them. And that made sense because one of the problems of Yahoo is its lack of focus. But on Monday, they announced the launch of a series of niche web shows that they say will not be competing with tv shows. Perhaps true, but it is once again difficult to see what Yahoo’s goal is with this new project. “We may have come at it from the wrong way in the previous era,” Sibyl Goldman, the head of entertainment for Yahoo, told the New York Times. “The one-way model – ‘We think this is great, we hope you come watch it’ – may have been more of a TV mindset,” she said.

Could it be profitable? Yes of course, there is no doubt that it could become so. But I somehow doubt that Yahoo currently has the creative team to make this happen which will force the company to spend much needed time and energy on a new project that could be spent elsewhere. Improving the finance network as well as the search and advertising capabilities seem to be higher priorities in my opinion. They are banking on sponsorship deals with companies such as Verizon and State Farm but that again seems like a short term move.

And if Yahoo really thinks it should have an important online presence online, it would have been much better to spend energy on building it in earlier stages. Now that competitors from Youtube to Hulu or TV.com have gained such an important market share, it will be very expensive to catch up from the slow start Yahoo had in this sector.

They claim to be getting 400,000 views on short clips, which is still very far behind Youtube’s daily hits in the tens and hundreds of millions. Just seems like Yahoo is either very late to the game or should have never even entered this one….

Quick post

By: ispeculatornew | Date posted: 03.17.2009 (4:21 am)

Good morning everyone!

I just wanted to inform you that we have written a guest post on fellow blog “The Wild Investor“, you can see our post here! I will be posting a similar article about Yahoo(YHOO) tomorrow as they unfortunately have some things in common with the New York Times, especially when it comes to its internet strategy (which in Yahoo’s case is critical obviously).

Also, we will be following Baidu(BIDU) in the next few days. It had an impressive up move and is starting to give some of it back which could provide an opportunity to go ahead with a new trade. Of course, my “favourite short” right now, Yahoo(YHOO) is already in play but there are other options.

Anyway, should be an interesting day of trading!

Long Priceline(PCLN) – Short Blue Nile(NILE)

By: ispeculatornew | Date posted: 03.16.2009 (4:00 am)

nilepclnFunny how the markets work, isn’t it? If you have been following this blog for a long time, you will know that i did this exact trade on December 17th, based mostly on valuation reasons as I thought the economic context did not validate BlueNile having a higher P/E ratio than Priceline. Of course, that trade worked out perfectly and was closed with a profit of 30%. Then, last week, I wrote a small note about how Priceline got destroyed because of an announcement by competitor Expedia(EXPE). Expedia basically announced a full range of specials ranging from specials on multi-day hotel room reservations and the fact that for some purchases they would not charge their standard 5$ fee.

Will these measures hurt Priceline in the short term? Absolutely. But I do not believe that such measures will have a medium to long term effect. Priceline is profitable and battling it out against 2 companies in Orbitz and Expedia that are increwasingly desperate to regain market share. Look at the below graph from Compete.com. Expedia still has the overall lead in visitors but look at the changes Year over Year.

compete

Priceline +28,2%
Expedia +3,1%
Orbitz +1,8%

Still wondering why the competition is getting desperate? More traffic means more revenues and more profits. I don’t think Expedia will be able or desire to keep these promotions going for too long. They are simply trying to hurt Priceline in the short term and regain market share. So overall I’m not worried at all about Priceline’s future. Their margins in the next quarter or two might be hurt a little but they are still the leader to be in the sector and will be growing.

That brings me back to the comparison with Blue Nile(NILE). It is not clear to me how Blue Nile can still command such a high P/E ratio. I think the company is promised to great things in the future, is the leader and will be destined to greatness. But trading at a P/E of 40 when it is in the business of luxury in an economy where consumers are cutting back on all big expenses makes no sense to me.  Blue Nile had impressive growth in the Q4 which was to be expected with Christmas being a big time for their sales. But it was still lower than the 2007 Q4 and I would not expect things to turn around quickly.

No doubt that the main risk in this trade is seeing Expedia go for broke with agressive advertisement campaigns that could result in a worse than expected performance by Priceline but I still believe that overall the Expedia business model is stronger and it will come out on top in the mdeium term.

Investment Talking

By: ispeculatornew | Date posted: 03.14.2009 (6:00 am)

I know, the new design is not completely done yet. I’m still working on it (getting a new logo shortly!). Be patient, it will worth it 😀

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


Get more info from Warren Buffet’s 2008 letter to shareholders at Fat Picth Financials.

Market seems to be gaining wings at The Wild Investor.

Citigroup Claims it’s a good year at Zach’ Stocks.

Dividend Growth does Pepsi Stock Analysis.

The Dividend Guy Blog is asking if precious metals belong to his portfolio. I’d say that gold is a winner!

Find out about your Broker’s compensation grid at Where Does all My Money Go.

Dividend 4 life talks about JP Morgan.

Are Treasuries in a Bubble? Find out at Stock Trading To Go

The Money Gardener added more P&G to it’s portfolio.

Notes and Quotes from 2008 Berkshire Hathaway shareholder’s letter at Contrarian Value investing.

Is the Devil playing the market?

By: ispeculatornew | Date posted: 03.13.2009 (4:00 am)

devilOff course it is. The Devil is short sellers right? I’m being ironic of course but I always find it very interesting to hear how often the media and government gets in the game of blaming short sellers for so many of the problems in the market, as if they were the cause of all evil. That’s putting things simply, to say the least. Remember a few months ago when regulators in the US decided to ban short selling on financials, as they kept repeating that it was one of the main causes in financial institutions instability problems. Of course, a year or so later, we should take out those tapes again just to see who was saying that. The law came and went, nothing changed as financials continued their road to 0. Did you notice anything different when being short became illegal? I sure didn’t.

Of course, there are many causes for all the stigma around short sellers and most of it is caused by the unknown factor. Of course, it does not help that most major networks do not want to talk about shorting ideas. Sure, it might look bad to have a Walmart ad come on air right after an analyst announced he was selling the company, but isn’t that what the market is supposed to do? Buy companies that are undervalued and sell the overvalued ones? Or am I missing something?

Maybe I’m the one who doesn’t get it as I currently hold short positions on Valueclick(VCLK), Knot(KNOT) and Yahoo(YHOO). But there is a reason why short selling has been allowed and that is because it helps get better valuations in markets when investors can profit from an unfair valuation. And no, putting laws will not change the fact that financial stocks are overvalued. You might slow the slide of that stock a bit, but if it’s going down towards 0, that fact won’t change so there is no sense in trying to ban short selling in my opinion.

With that being said, there is another reason why short sellers have a bad name and that is somewhat warranted. The fact that some investors take a short position and then spin off some rumors to tank the stock. There are many different ways this is done, most of them being illegal. And of course, such market manipulation is illegal. But let’s not kid ourselves either, such manipulation also happens on the other side with investors spinning off merger rumors as well as many others. Think of how mining stocks always are rumors to have found the big field of gold.

In general, short sellers are hedge funds or market neutral funds, they are not short overall, they are generally as long as they are short, and so are looking for inefficiencies in the market. Isn’t that a good thing? Generally, having a market that is efficient is seen as a very positive thing. But somehow, if that means a stock is overvalued it’s not….?

Quick update

By: ispeculatornew | Date posted: 03.12.2009 (11:32 am)

Good afternoon!

As expected, Ebay opened up today but KNOT is also having a good day so as of writing this, the trade is up 19,5%..let’s hope it can reach 20% by day’s end!

By the way, I also have a live trade on Google and wrote a guest post on Zach’s blog today about an interesting action from Google, be sure to check it out!

Good trading!

A few thoughts on today’s action..(EBAY, PCLN)

By: ispeculatornew | Date posted: 03.11.2009 (4:23 pm)

Today was an interesting day in the markets with Ebay rising by 4,8% as they announced that the Paypal division was expected to double its revenues by 2011 creating by itself an important amount of growth. And as of writing this post, Ebay is up an additional 3,7% which if it carries through could mean the successful end of the February 25th trade,  as the trade is currently up 24%. But given that part of it is after market, I will wait tomorrow’s action to decide if the close should be terminated.

On another note, some very interesting action in the internet travel sector as Expedia announced a major promotion that sent Priceline and Orbitz sinking. I will have to re-evaluate the situation but it certainly looks like a trading opportunity. I have major doubts that Priceline’s 6,6% decline is warranted but it is already rebounding after hours so for now I will observe and perhaps Priceline will be part of my next trade, it has been a favourite of mine in recent months.

All for now!

Google… one way you could profit from Youtube

By: ispeculatornew | Date posted: 03.11.2009 (4:00 am)

youtubeIn November 2006, when Google announced it was purchasing Youtube for $1.65 billions, it raised a lot of questions about how they intended to profit from this new purchase and what plans they had in mind. They cleared up from the start that they would not be changing much from the perspective of the user clearing up rumors about the possibility of adding ads before the start of other videos and other such methods often seen as “restrictive” from the viewer’s perspective. Truth be told, few raised doubts about Google’s ability to generate a cash cow from the leader in online video. As Google had done with many other of its products, we expected to see Google come up with many innovative ideas to come up with advertising dollars.

But while the game is far from over, Google has certainly not been able to live up to its shareholders expectations for Youtube as it has been defined as being about breakeven, far from its target and the from the usual return on capital that Google is used to. The good news of course is that Youtube has continued to grow in terms of users, of content and despite many issues with Copyrights, it seems to be getting better about dealing with all of these issues as time goes by which is obviously great news.

huluIn terms of competition, there is little to none. The main competition currently is from Hulu, the Super-Bowl promoted video website that has been gaining a lot of ground in recent months although it is in a very different competitive arena than Youtube. While Youtube is getting content from every possible arena and all kinds of users, Hulu is focused on professional content mostly generated by US TV networks such as FOX and NBC. The problem for Youtube is that since Hulu’s content is better controled (obviously), advertisers feel a lot safer spending money and knowing that their brands and messages will be next to high quality content while that is much more difficult to promise on Youtube.

But I still think Youtube has enormous potential and am surprised to not see more in terms of innovation coming from the Google division. Here is one idea that i think could in a matter of 3-4 years become a major revenue generator. What is the biggest online event in the world? The SuperBowl of course!! Why? Well there are many reasons and perhaps the most important is the number of viewers captured at once. But perhaps even more important is the creation of an interest in the ads. Some studies show that as much as half of the viewers are more interested in seeing the ads than the game itself. Gold you say? Obviously. The ads are not only a 30 second span to gain attention but will often be talked about and watched for days and weeks. That is worth so much for advertisers.

So back to Youtube, I think a similar concept could be applied to Youtube, in terms of generating major events that would not cost much.

Here is a breakdown:

-Youtube sets up an annual contest of 30-60 second clips with entries of 100-200 videos subject to editorial picks to start with. Then, over a month, perhaps in October/November (to capture the viewers attention before the all important Holiday season shopping), you have the competition ina similar format to that of a tennis draw or an NCAA basketball event. Every day, 8 ads could compete with the highest rated ones moving on to the next round.

-Can you imagine the amount of buzz that could be generated over one month as fans talk and discuss the better ads and vote for their favourite ones. Every day, you have 8 ads that would be viewed by tens of millions around the world.

And then when year #2 comes around, you apply the same concept but charge for entry. Pepsi, Coca Cola, Budweiser, etc would certainly be more than willing to pay 10-20K to start for such a spot/opportunity and as demand rises, so would the entry price. If the Super Bowl can generate a few millions per ad, just imagine how much this could generate for YouTube???

Any thoughts?

Long WebMD(WBMD)/Short Yahoo(YHOO)

By: ispeculatornew | Date posted: 03.09.2009 (4:00 am)

yhooLast Friday I closed out a profitable trade where I was short Yahoo against Baidu. The trade ended being profitable but I’m still surprised that Yahoo has continued to see its stock remain steady while the company certainly has seen its growth slow down. I found it a bit difficult and frustrating to be short Yahoo! because the recent changes in the structure have been followed by almost weekly announcements of changes in the direction, or new technology arrivals. It is to be expected of course and it is putting upward pressure on the company but in my opinion the major story going on is still the mass departures of key employees and lack of overall direction in the company. I still find it a great opportunity to trade on and will get on another trade against the purple company:)

webmdThis trade is one done for two main reasons but first just a brief intro on WebMD for those who are not familiar with it. WebMD.com is a website dedicated to providing online information related to health. Its major strentgh is the credibility it has built over time and it has obviously been adding content over the years making it by far the leader in the field. While other web portals have been starting to look into competing with WebMD (including Google Health), no one has quite provided a comparable quality of information.

So the two main reasons I am looking into making this trade are direction and advertising power. First off, I have been clear about my thoughts that Yahoo! has a lack of direction. The same could perhaps be said of Google although it is clear that they have a few priorities (mobile being the biggest probably), but in Yahoo’s case, it is very unclear. They have been losing ground in many segments and while it looks like they have stopped losing ground in the search market share, it is quite unclear where the company growth will come from as it is attacked in all of its fields. The once so dominant Yahoo Finance website for example has been losing ground to competition very quickly and the same could be said in games, dating, etc. WebMD on the other hand seems to have a very clear understanding of its strengths and I firmly believe that it will benefit from its focus.

As well, both companies are dependant almost 100% on advertising for their revenues and while Yahoo! certainly has a lot more diversification, they are also a lot more dependant on the overall health of the advertising sector and the overall economy’s strength. Health companies and pharmaceuticals might see a slowdown but they are generally less prone to retraction. As well, such companies have a much slimmer array of possibilities when wanting to target customers. WebMD should therefore be able to maintain its pricing power a lot more than Yahoo in the current context.

There is a lot more speculation regarding Yahoo and a possible match with Microsoft but I still feel that valuations do not make sense as they are both trading to comparable P/E’s but I see WebMD still growing while Yahoo is not clearly going in the same direction…! So I will enter this trade at today’s market open!

Investment Talkings

By: ispeculatornew | Date posted: 03.07.2009 (6:24 am)

Only carnivals this week… (MBA exams yesterday, today and tomorrow!):

We’ll be back on Monday ;-0

Carnival:

Carnival of Personal Finance

Festival of Stocks