Archive for September, 2009

Steve Jobs is back, time to buy Apple?

By: ispeculatornew | Date posted: 09.14.2009 (5:00 am)

I was sent a link to this video from one of our readers, it is a touching video and one that strikes many of us who can relate in one way or another to what Steve Jobs went through. There is no doubt, Apple’s future has often been linked to Steve Jobs’ health. While it is true that his return to the company in 1997 marked the start of a remarkable comeback by Apple, the company has evolved a lot in the past decade and it is difficult to imagine that his return would have the incredible impact that many believe it will. Steve Jobs is surely a great mind, probably one of the best in the tech space, but the fact is that Apple’s main products, the Iphone and Ipod are likely to remain the major products of the company for the foreseeable future. And if that is the case, Apple’s current managers are up to the challenge.

Now I’m not saying that the return of Steve Jobs will not have an impact. I’m simply saying that we have to be careful no to overestimate the impact of his return or absence. The company will not sell millions more of its products if Steve Jobs come on our tv. The company will sell more if it continues to have superior products and continues to innovate as it has been doing for the past decade.  I’ve already stated that Apple will be very difficult to stop because of its current position and Steve Jobs is certain to be involved in the production of new products such as a competition to Amazon’s Kindle. But Apple would have done those things even without Steve Jobs so I would be cautious about trading on such news. I will be writing later this week about a new threat to Apple coming from applications available on its own Apps Store, ironic isn’t it? Things change quickly in this field and I’m confident that Apple remains a very promising company but with a current price at over 30 times its earnings, there might be some better opportunities elsewhere in the tech industry. Personally, I’d be very cautious about buying into Apple right now, especially if it is based on the return of Steve Jobs.

One of the interesting aspects to follow in regards to Apple will be if they renew or not their exclusive partnership with AT&T in the US for its Iphone. While the exclusive contract does give it a lot of cash, there is no doubt that it is also slowing its growth as many customers do not want to switch carriers. That decision will come soon as the partnership ends next year!

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Money being poured in ETF’s

By: ispeculatornew | Date posted: 09.10.2009 (5:00 am)

spyExchange traded funds, known by most as ETF’s have been the latest trend in both institutional and retail investing and we have been very strong believers in the fact that ETF’s represent a great asset class to build a portfolio with. And so investors have been sending much of their money into ETF’s, to the tune of several hundred billions of dollars in 2009. Quite impressive don’t you think? So naturally, I would have assumed that most of their funds were going towards commodity funds as we hear so much news about huge funds such as UNG and USO. But in fact, the commodity ETF’s have not been the most popular destination in 2009. It has been fixed income ETF’s!

Why fixed income?

It might sound surprising to many that the most popular category of ETF’s (in terms of cash inflows) has been fixed income but in fact it makes sense. While equity is a major portion of investors portfolios, fixed income is also a major portion and unfortunately has generally been a category seen as “unfriendly” by most investors. Why? Try buying bonds on a major US company. You will be able of course, but you will end up buying a heavy price. There are many reasons behind this. Generally, bonds is a product traded by the millions. Call a broker to buy 10,000$ worth of bonds and he will do 2 things:

-laugh
-give you a bad quote to compensate for his time!

As well, since bonds are not traded on listed markets, there is little transparency so the brokers do know that it will be difficult for customers to complain about the price they got. Because of that, it becomes very tricky for retail investors to be active in fixed income without getting “screwed”.

The new alternative

So suddenly, ETF funds make it possible for investors to invest in fixed income and get competitive pricing because these funds are big enough to get good prices and be able to shop around for the best prices. And since these funds trade on listed markets, investors have a good idea of what they are buying and if their price is fair.

Here are in order the ETF categories ranked by cash inflows in 2009 according to Credit Suisse:

1-Fixed income
2-Commodity
3-Leverage Short
4-Emerging markets
5-Sector funds
6-International
7-Value
8-Special
9-Currency funds
10-Total market
11-Small cap
12-Mid cap
13-Growth
14-Leveraged long
15-Large cap

Please note the last 3 actually saw a net decrease in cash flows.

Should Google compete with Goldman Sachs?

By: ispeculatornew | Date posted: 09.09.2009 (5:00 am)

google-domination-250x300Should Google start trading stocks to gain additional cash flows? Probably not no. But it certainly could. Think about it for just a few minutes. Who knows more about what customers are looking for than Google? If customers are searching 20% more for a new Toyota model while they are looking 20% less for the new Ford launch, does this mean that Ford is not selling as many cars? Probably not. But as data gets more and more reliable and comes in with increasing quantity and quality, chances are that Google will soon be in a good position to know what customers are currently buying and what it isn’t.

There are so many ways to use the data, it almost makes us dizzy really. But the truth is that there is little doubt; this type of data does have value; lots of it.

Google and its priceless data

Up until now, Google has seemed more interested in just giving us previews of what could be done with the data, than actually using it. But a new addition to its finance portal; Google Domestic Trends, promises to go down the path of using this data. Google seems to have decided for the moment to simply give the info away rather than using it or selling it. Of course, that is no surprise from Google and it is true that up to now, the data available is very general and is not easy to use. Or is it? Take a look at this data compiled by TechCrunch that links the actual retail sales with those predicted by the Google Retail Index. Very impressive and this could certainly become a very valuable source of information, especially for trading purposes.

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Trading, really?

Why? Because while trading is already done on indicators such as Retail Sales, the data is usually released weeks and even months after the facts by government agencies. The data from Google however, could be available almost in real time. And in a world where information is the key resource, that has a lot of value. The graph below is the Google Auto Financing Index. Depending on how accurate it is, you would think that auto sales would be coming down quite a bit (logical following the end of the Cash for Clunkers), and it is certainly information that could be traded on.

Should Goldman be worried then?

Of course, right now, there will be no  one at Goldman or elsewhere that will lose sleep over this. But give it a few months/years and those who have the right type of access to Google data might become a major force to be reckoned with…

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Labour Day weekend!!!

By: ispeculatornew | Date posted: 09.07.2009 (5:00 am)

labor_day_2001Hello everyone, yes indeed, today as you guessed, there is no post, labour day obliges and with the great weather, no one is complaining:)

Paying millions for a domain name? Crazy? Not so fast…

By: ispeculatornew | Date posted: 09.04.2009 (5:00 am)

toys_r_us_sg-500x375I always enjoy reading those mainstream media articles that discuss domain name auctions. To many, someone paying $5.1 million for a domain name such as Toys.com is insane and a bad business decision. I really think that most of these articles do not take the time to analyze the investment. Imagine you have a toy business and make a decent product. There are of course almost unlimited ways to get traffic to your website, most ways will end up costing money. If the actual method is free, chances are good that you will be spending money on labour force. Some methods are better bargains of course but in reality, few companies are able to generate the massive buzz that a viral campaign can offer.

Going back to our example, let’s take a company that has $1 million in annual sales and spends about $200,000 in promotion for its website. That is highly plausible, much of that money could be spend on search engines, in branding campaigns and so on. Maybe that website would even be doing some limited tv advertising. Fact is, many toy companies spend much more than $200,000 in marketing annually.

I think I would be able to convince you that an ad with the name Toys.com could be twice as effective as a campaign for MyBestToyStore.com. There are so many ways. First of all, any viewer that saw or heard the name will probably have at least 2 or 3 times more chances of actually remembering the name. That means that when he will think of buying toys online, chances are that he will go directly to Toys.com. That is worth a lot of money and strangely, it seems to be underestimated by the mainstream media. If a toy store owner is to be twice as effective on his advertising over the life of his company, which could be decades, wouldn’t that be worth a million or two? I would certainly think that it would.

What are your thoughts? Would you invest an major amount of money in a domain name?

Time to dump Ebay

By: ispeculatornew | Date posted: 09.02.2009 (5:00 am)

ebay-logoI have written a few times about Ebay since starting to write on IntelligentSpeculator, and generally been positive about the stock. In fact, it was even one of my 4 stock picks for the 2009 year (in a competition I am still leading by the way!). Basically, one of my beliefs was that analysts were underestimating the impact and importance of two segments of Ebay; its Skype business as well as its Paypal business.

While in the stock picks competition I cannot actually change my picks, I do believe that now would be a good time to sell and even perhaps go short Ebay. Yesterday, Ebay confirmed it had sold its Skype business to a group of private investors for $2.75 billions. The stock did rise a little but the more negative aspect of the sale for me is that this signals a major failure by Ebay in converting Skype into cash flows. The business that could have been has now turned into a fluke. Ebay really did not do much since acquiring Skype showing little innovation, and no signs of a clear business plan. There were some interesting ideas such as pushing for a wifi cell phone on a large scale which could have been costly to launch but if it had caught on, could have been a major product. Imagine having a cell phone that does not charge per phone call or minute used but only charges a monthly fee. Ebay did have some of those ideas, but they were never promoted much and did not amount to anything close to what could/should have been…

skypeUnfortunately, the same story seems to be going on with Paypal. While it is still dominant on the web in the electronic payments market, Paypal has not been showing much in terms of innovation and seems to be at a place where a competitor could quickly gain ground. Much speculation has been made of Google’s possible desire to enter the business but right now, the major threat is from Facebook. While the social media is still a private company, it is very quickly expanding, has a lot of cash and ambition to go with it. Facebook has become the most used social media website and has started to use that power to give itself interesting possibilities. Increasingly, Facebook users can log into different websites all around the web with their Facebook login/password. That expands the brand of course but also makes setting a payment solution much easier as customers are trusting Facebook with an increasing amount of data.

So that leaves Ebay with its core retail business which has been showing little promise and frankly no signs of an upcoming turnaround. While others such as Facebook, Google and Microsoft seem to be launching features and products on a weekly basis, there are very few announcements coming out of Ebay and to me that will end up being its demise.

Was selling Skype an error? No probably not. The error was not doing more with a product that had terrific market share and possibilities… Ebay has been at a standstill for too long and in the current tech environment, no company can afford such a luxury.