Archive for June, 2009

Microsoft (MSFT) under attack, is it about to go under??? (Part 1 of 6)

By: ispeculatornew | Date posted: 06.08.2009 (5:00 am)

darksoftNo doubt, this is quite a different era for Microsoft. Just a decade ago, Microsoft was under attack by competitors but not through innovation and new products, rather through courts and legislation as many companies and government officials thought Microsoft was too dominant and was abusing its monopoly. How things have changed…. In a matter of a few years, the company at the roots of technology has ventured into different markets and has enjoyed some success but now looks like it will be in a difficult situation for the next few years.

To make matters worse, Microsoft is currently under attack in more and more markets to the point where we can ask ourselves what its future will look like in the near future. Crazy? Barely. Over the next two weeks, we will be publishing a series that will look into Microsoft’s success in competing against Apple (the famour Mac vs PC war as well as handheld devices (Ipod vs Zune), Google (Search, Software such as Office as well as operating systems) and even gaiming as XBox competes with Sony and Nintento.

And with Bill Gates heading out of the company slowly, it is not clear where the leadership will come from in the next few months and years. And with Microsoft recently doing its first bond issue, it is clearly trying to get even more cash, but to what purpose? That is not clear. And Microsoft recently launched “Bing”, a major attempt to regain some momentum in the lucrative and key search business. Anyway, without further wait, here are the subjects of the next 4 posts:

2-Apple (PC vs MC) & Zune
3-Mozilla (Firefox)
4- Nintendo
5-Google (Monopoly, Office, Windows vs Android)
6-Google (live.com, bing, monopoly)

As well, we will look into different ways we beleive Microsoft could use to become more competitive and insure that it can not only survive but also strive in the next few years. It could be debated over and over if Microsoft is getting too spread out as it tries to compete in multiple industries. Will Microsoft go bankrupt soon? No, I don’t think anyone could pretend that. But is Microsoft going to become increasingly irrelevant? That might be a legitimate question and one that no one knows the answer to. But we certainly have a few ideas and we’d also love to hear your ideas on the subject.

Target date ETF’s/funds

By: ispeculatornew | Date posted: 06.05.2009 (5:00 am)

target-date-thumbTarget date funds? Ever heard of them? They are basically funds that are set up as either ETF’s or mutual funds. Not much of a difference between the two, the fees are obviously more important in mutual funds. Anyway, so these funds generally have a date attached to them that they target to. For example, being almost 30, I can expect to retire in 2040 so in Canada I could invest in the TZV Ishares fund. The advantage of course is that in theory I could be investing a significant amount of my savings in this fund as it is diversified but also the fund’s asset allocations will change over time to take on more risk in the earlier years and as retirement approaches, this fund would take less risk and become more geared towards fixed income securities.

In theory, it is great and I honestly was looking into investing in this type of security. That was until I read the fine print. You see, this fund (and many others like this one) actually invests in other ETF’s. So for example, if you have a portion of your investment in US securities, they would take a portion of the cash to invest in an ETF that tracks the S&P500. The major problem here is that you have an additional layer of fees. You are investing in a fund that invests in more funds and thus you are paying two level of fees. If these investments were complicated and difficult to manage it might be worth the trouble. But given that there are only so many investment asset classes, the rebalancing could be done easily by myself and I would be saving 0,20-0,30% on my investment. Sounds small? Think about how much it adds up to over decades and decades. I think it would be very easy to re-allocate anyway. You select the 5-6 asset classes and how you will invest in them (which ETF’s for example). Then, you can simply determine the % you should have in each one and each time you buy new funds, you buy the one that are undervalued on. It’s not perfect but I would expect this to overperform the target date funds significantly over a few decades.

If you read this article for example, you can see how they make it seem so difficult to manage these funds ourselves when actually these target date funds are barely changing their investments and allocations making it very easy to replicate.

But I’d be interested to know if you have looked into other target date funds and if they are all built in this way. I would imagine that mutual funds built this way would be even more of a “bad investment” as the fees will add up even more quickly.

What is the top down approach??

By: ispeculatornew | Date posted: 06.03.2009 (5:00 am)

stockIt’s something that you hear about when reading about stocks, the top down approach as well as the stock picking. What are they and which should you go by??? This post will be a little introduction to both methods and who uses them.

First off the stock picking. This one is the easiest to understand as most investors (especially those not working in the investment field) will usually go through this. It is basically when you hear or read about a company, decide to read about it, either the financial statements, or analyst recommendations, etc. Then, you decide to either invest or not in the company. Fairly straightforward isn’t it? There are obviously many things to be aware of when using stock picking, especially those that clog all of their picks in the same sector. Think you know who will find the next diamond or gold mine? Want to invest in the company? That is fine. But just remember that you do not want your retirement to hold on finding that one company. Ideally, you would not be investing too much in one specific field or industry.

Now let’s move on to the top down approach. This where knowledge of the economy helps. Basically, someone using this method would be looking at data about the world economy. You can then find specific areas of growth or scenarios. Let’s say you predict a rebound of the US economy in late 2009. Then, depending on the stage of the economic recovery you are targetting, specific industries or sectors usually perform better in those periods and you will be looking to invest in those areas. Once you have determined your scenario and industries, you will be looking at the specific companies that you expect to do well in this scenario. It is certainly not an easy or quick process to go through but you can usually be a lot more diversified and perhaps invest in companies that you never would have thought of initially. You could for example imagine that the US government will be investing a lot in the health care industry and getting a more central and public system under way. If that is the case, chances are that companies that can provide a more universal IT system that will replace each state’s system. In that case, you would probably be looking for an IT company that can provide a solution. In the same way, the energy policies of the Obama administration tend to promote green energy sources so you would think that solar energy companies could do very well in this environment. These are just a couple of examples but I think they illustrate how the top down approach might require more analysis but can provide with better picks in the long term…

The new Pepsi

By: ispeculatornew | Date posted: 06.01.2009 (5:00 am)

pepsiWhat is a company to do when its ultimate competition is “the classic”, the one and only brand that has been at the top of its market since its market came to life? That is the question Pepsi marketing employees ask themselves every single day as they try to win a few points of market share every year.  To a large extent, Pepsi continues to do that and now enjoys over 30% of the market share, still shy of Coca-Cola’s 42%, but still a very solid second.

It’s always a risky move when you have such a market share to change your image dramatically as you can suffer and end up on the losing side. But I admire Pepsi’s recent marketing efforts. Simply look at this new can and you will notice a look that looks very “futurist”. You might like it or not (I personally do), but it does reinforce the image of a “new” Pepsi. And visit their website, the first thing you will notice is links to their Youtube channel, the Pepsi Facebook page and so on.  Compare that to the Coca-Cola page and while the design of Coca-Cola(KO) is not that classic, it clearly seems to lack the features that its competitor has.

Will it translate into more sales? That is of course the million dollar page and one where it is difficult even in this era of technology and data to get right. So many factors come into play. And while you might be tempted to look into the stocks of the two companies to evaluate which soft drink is doing better, it is more complex than you would think. Coca-Cola(KO is +8,58% YTD)  has outpeformed Pepsi (PEP is -4,96% YTD) but as these companies have evolved, they have became so much more than a one drink company. Both have important distribution networks and produce almost every type of liquid from very simple ones such as water to more evolved energy drinks that fit different target markets.

Oh and in case you were wondering, Pepsi’s new “hip” website is getting 49% more visitors than a year ago while Coca-Cola is up 11% (according to Compete.com), which is certainly one area where Pepsi’s innovation strategy is paying off.  I would say that if you included Pepsi’s online presence on websites such as Facebook and Youtube, it is easy to imagine how Pepsi will be able to use the internet to market its product and reach its customers, something Coca-Cola seems years behind at the moment… I for one would bet that will be paying off very soon!