Archive for December, 2009

Linkedin…the hidden treasure?

By: ispeculatornew | Date posted: 12.11.2009 (5:00 am)

linkedinSo far this year, there has been a lot of hype around social networks and their possible IPO’s but almost all such discussions discuss only Facebook and Twitter. To be fair, those are also the first two ones that we covered. But we actually think that there might be even more value in smaller network LinkedIn, which was founded by former Paypal executive Reid Hoffman. To be certain, the network is very different and so are its ambitions. It will probably never become as popular as Facebook or Twitter but that is not its ambition either.

What is LinkedIn?

LinkedIn is a social network that is similar to Facebook in many ways. You have a profile which you can update and then you can add connections. But instead of adding former girlfriends, high school friends and family, this network concentrates on your professional connections. So you would generally add your colleagues (past and current) as well as any others that you have in your professional network.
For centuries, finding a better job has always been very much about who you know. Many jobs are not posted anywhere and when they are, it is not necessarily the best candidate that will land the job. Quite often, knowing the right person will give you a huge push as well. That is why many are more than willing to join the network.

With such a great field of workers, it also becomes a dream playing field for companies that are looking for candidates. It already boasts a very impressive 50 million members with thousands more joining every day. What better way to find a few good candidates quickly????

Recently I did a trade going short on Monster and one of the reasons is that employers are increasingly looking into websites like LinkedIn to get their candidates which does affect the interest in more standard job posting websites such as Monster.

-Revenue

In my opinion, one of the most positive aspects about LinkedIn is that has a lot more revenue diversification than other social networks such as Facebook and MySpace (Twitter remains to be seen). Now this is not a knock on LinkedIn’s advertising possibilities. It has a very attractive audience and while they might be a bit biased, just take a look at their own research data , the numbers could probably be debated but I doubt even the Wall Street Journal would argue with most of the conclusions. The “average member” on LinkedIn is young, connected and generally has a good career. Rarely have I seen unemployed dropouts on the website (has not happened actually).
But their biggest source of revenues, and the reason why such a young internet company has been profitable for 2 years, is what it can do for corporations. They offer several subscription models that basically make it possible to:

-Search through loads of data
-Contact members

This can help to find possible clients, employees, etc. And since such messages are limited even with subscriptions, those that are sent (such as job offers) are generally of great value for both parties, an ideal situation for the website to keep all parties happy. I would think that such services will play a critical role in the future of LinkedIn and they will be much steadier than an advertising only model such as the ones currently used by Facebook & MySpace.

linkedin-com_uv_1y

-IPO soon?
The good news for those who would like to invest is that Linkedin CEO Jeff Weiner is open about its intention to do an IPO within 2 years and since the company is already profitable (and has been for 2 years), it will be easier to get it done than many other web companies. “We’re well ahead of plan for this year which is great considering the macro economy”.

However, since they still have the vast majority of the $100 million it raised through venture capital, there probably is no hurry to get it done right now. “When everything is working, why sell? We are trying to build a great company that will be around for decades”.

-Other considerations

It is of course impossible to say if I will be a buyer of Facebook, Twitter or LinkedIn but I personally think that there is a good possibility that much of the pricing of these companies will be done in terms of users and user growth. That would be great news for buyers of LinkedIn as I think it would underestimate the potential revenues that will come out LinkedIn…

Closing Google vs IAC Interactive

By: ispeculatornew | Date posted: 12.10.2009 (4:10 pm)

google-fireGood news as I was able to reach my objective on another trade today with the trade on Google vs. IAC Interactive reaching 20%. Actually, since initiating the trade about 2 months ago, IAC Interactive has barely moved but Google was able to take a 15% swing upwards. The trade had been close to the 20% objective for over a week now but never closed above that threshold which was necessary for me to able to close my trade.

There is no doubt; I will probably be trading both names again soon, especially Google. The search giant continues to be very aggressive, especially in the mobile arena as it takes on both RIM and Apple in the smart phone battle as well keeping up the fight with Microsoft’s Bing in the search engine battle.

Speaking of that, the latest search numbers released show Google gaining market share from Bing, a reversal of the good trend by Microsoft’s new engine…

I don’t expect any other trades to close for a few days as none have reached +10% or -10%… I will probably be opening up a new trade on Monday but that might be the last one for 2009 if markets don’t remain as volatile… we will just have to wait and see won’t we:)

Our 2009 average trade has gained 2.85% as of today, very good considering the average of less than 2 months for each trade (meaning you could do 6 trades with your money and in theory get 6 x 2.85% + compound factor.)… But that is just in theory isn’t it?:)

The ETF battle heats up…

By: ispeculatornew | Date posted: 12.09.2009 (5:00 am)

ishares_logo_2It certainly gives me the impression that a few ETF companies are feeling the heat. They need to gather as much assets as possible because as true as it is that there are new ETF’s being opened every day, there are also ones that are closing almost as frequently. The name of the game is very simple of course, gather assets. Those assets make it possible to get more revenues, to decrease fees and advertise its lower fees (which brings in more assets, etc, etc). It’s a simple game isn’t it?

Too many similar ETF’s?

It now almost seems like companies are now entered in a race. And that is understandable. How many ETF’s do we need to track the S&P500? Maybe having 3 or 4 might be good to increase competition. But there are many more right now and it is difficult to imagine them all surviving. For that reason, even leader IShares (now owned by Blackrock) is being very agressive through tv ads, magazine ads, sponsoring sports events and even through its own website, Youtube channel and much more.

Is Ishares or Vanguard the next Altavista/Lycos???

All of these companies know that it is still early in the game but it is also a crucial time for all of these companies. Remember how Altavista and Lycos were the early leaders in the search engine race but were then crushed by Google? I personally don’t think that will happen with Ishares and Vanguard because ETF’s that track indexes such as the S&P500 are fairly simple and cannot be improved that much apart from diminishing fees. That is a fact; ETF’s that track equity indexes are becomming commodities and like other commodities, prices are king and rarely is there enough space for 10 similar or identical products…  It is all about becomming a successful ETF.

But every day new ETF’s pop up that do not track clear indexes. They either track more broad indexes or they are even active. I will be writing about active ETF’s (alpha) next week  but I think that most ETF companies will eventually be launching those. And being seen as a leader in ETF’s will be a major step to help get those ETF’s started.  How bad do they want it? US fund management company Vanguard (#2 in the US) apparently made a $5 bln offer for Ishares but Blackrock came out with an even better offer, making the purchase for an incredible $13.5 bln!

New trade: Long Ebay(EBAY) – Short Monster (MWW)

By: ispeculatornew | Date posted: 12.07.2009 (5:00 am)

monsterAfter closing my trade on Priceline/Travelzoo Friday morning, I was now ready to take on a new one. I was looking at the two dozen companies that I currently screen through. One name that I wanted to look more into was Monster.com (MWW), which as many of you probably know makes money by charging employers money to either publish job offers or give up details of potential candidates. Even though the employment report on Friday was very strong and encouraging, I continue to believe that this is a very difficult to compete with. Many local and specialised websites have continued to grab market share in a market that is not exactly exhibiting strong growth in these difficult economic times.

What was surprising to me was that despite Monster showing negative revenue growth for the past few quarters, it continues to trade at a rather high valuation.

Another company that I consider to be in a similar environment is Ebay. In the auction/listings market, Ebay has long been the target of many smaller, free websites. That is of course what explains Ebay’s slim growth and gloomy prospects. I have written about Ebay’s ebayunder-use of its Paypal unit quite a few times and in recent weeks I have started hearing ideas and plans for the lucrative unit that continues to dominate the web. That is very encouraging and I believe that Ebay can at least slow down its decline and maybe generate a few new revenue sources that can change the entire picture.

I’m simply not as convinced that Monster can pull off the same and have not heard much in terms of plans. Take a look at these graphs from Google

Monster revenue/profits:

chart

Ebay’s not spectacular but still much better numbers:

chart2

And now for the graphs:

mww

ebay

And yet Monster continues to trade at a much higher P/E ratio, something I truly do not understand. Therefore, I am ready to enter into this new trade between two companies that have many similar characteristics but Ebay has many more options to get back into a “higher growth” phase. Will Monster’s long term prospects be tough? Maybe not. But the current economic conditions will offer many challenges to Monster for the short to medium term.

Disclaimer: No return is guaranteed and each recommendation should be considered within the investor’s individual situation. As with any financial investment, there are risks involved.

Financial ramblings

By: ispeculatornew | Date posted: 12.06.2009 (5:58 pm)

yorkshire-landscape-112It continues to be very interesting to follow the markets with so much uncertainty, especially surrounding the US economy, dollar and deficits.

Friday’s employment report came in much better than expected with only 11,000 jobs lost, much better than in past months and than almost all predictions!

Here are some of the better readings I enjoyed this week:

-One of those very infrequent things, how do you claim capital losses from a delisted stock? From MDJ

-TFB is now 3 years old and has some great prizes (including free Ipod!) to celebrate!

-GLBL: 4 questions you should ask yourself when setting your financial goals!

-GetRichSlowly: Yes, failure is ok

-Canadian Capitalist: Very interesting look back at the returns of bullion Gold.

-Zerohedge: There are many theories about the importance of the Japanese Yen, and what its movements mean for the world economy and the world markets. Turns out it had its biggest weekly movement in 5 years last week!

-Stocktradingtogo: Top 10 hottest ETF’s for December!

-NY Times: Apple looking to buy a new music start-up?

-Time.com: Will Dubai’s Financial Problems Spread Around the Globe?

Closing Priceline(PCLN) – Travelzoo(TZOO)

By: ispeculatornew | Date posted: 12.04.2009 (5:00 am)

priceline1Yesterday’s action was brutal on one of my short positions, Amazon. While it is paired against Baidu (which is up a reasonable 9.56%), Amazon’s surge is creating problems. I am now down 7.45% on the trade. I probably miscalculated the impact of having all of those websites/media talking about Amazon as the best pick to play the holiday online shopping. In any case, I still expect this trade to reverse.

The good news however is that I am closing another successful trade at today’s open as my trade on the online travel industry featuring Priceline and Travelzoo worked out well and closed yesterday at +23,14%!

Actually, Priceline gained over 8% while Travelzoo declined more than that.. so a good call!

Will post final price later today!

Is Twitter worth $1 billion???

By: ispeculatornew | Date posted: 12.03.2009 (4:09 pm)

twitter-iconTwo weeks ago, when discussing all of the hype about a few IPO’s, three companies were mentioned. We discussed Facebook last week. Many are looking forward to Twitter’s IPO the most, especially thanks to its 44.5 million users (as of June). It has been confirmed that many companies including Google have looked into possibly purchasing the social network that is increasingly becoming a part of our culture all around the world. What is less clear is how they will be able to profit from all of these users.

How can Twitter make money???

To most, the fact that Google makes billions of dollars is difficult to figure out because they do not know how Google charges for ads placed on top of search pages or how lucrative those ads can be, especially when you are serving billions of them every day. But with Twitter, it is even less clear. Even the brightest guys in the industry have trouble figuring out a clear way to make money. There have been many ideas and Twitter’s heads continue to say that they are still on pace to start rolling out those solutions soon.

twitterLast week, there was a plausible rumor that Twitter was going to start charging to receive certain Tweets on its Japanese website. The idea was denied by Twitter after all but I personally think this could be a good way to go. For example, I think few would pay to read how their best friend is doing. But what if you had to pay 1$ per month (or less) to get access to Ashton Kutcher’s tweets. And of course this would mean that Twitter would split the money with those “special users”.

If they will not charge for certain Tweets, then what?

Other options that have been discussed are advertising (of course), partnerships with other websites, profiling a few corporate accounts, etc. But honestly, nothing has been convincing yet and it will be very interesting to see how the user base will react when such solutions are rolled out. That is always the danger with social networks. If you annoy the users, they WILL leave, and it can happen very fast. Just take a look at how MySpace went from domination to a dinosaur in just a few months as it lost its “it” factor.

Twitter has said that 2010 would be the revenue year although he does not know if they will be profitable. Current private investments have valued the company at close to $1 billion but I’d be very surprised to see an IPO before Twitter clearly demonstrates how it plans to eventually become profitable.

Twitter vs Google????

I think search can be a big part of it. It does have one advantage on Google. It has a tremendous database of live data, what people are saying and thinking about. While they might not always be searching on Google, they are almost always giving out their thoughts to their friends/family on Twitter. That knowledge could become a game changer to be certain although taking on Google in anything is quite a challenge.

Twitter is fun to use… but does that make it a good investment?

Why I love Apple’s business model

By: ispeculatornew | Date posted: 12.02.2009 (5:00 am)

logoThere are a few examples of business models that seem to be perfect to build an empire and in my opinion, that is exactly what Apple has. They have built a line of products that were created initially to watch music (Ipod) but have grown to become so much more.

Video was added as was the ability to view photos, listen to podcasts and more. Then, it became possible to capture photos and now even videos. It basically became the ONLY gadget you need in your pockets, except for your wallet. And even that may eventually be replaced by the Iphone. But the real game changer happened when Apple opened its store to applications.

iphone_homeWhy do I believe that? Because that’s when Apple created a business with major revenues and no costs. How often does a company have that opportunity? Here is one example sent by a loyal reader, but there could be hundred of other cases. Take a look at this article published in the UK media about research that is being done on an application to detect respiratory problems (potentially could help detect viruses such as the H1N1. The great thing about this is not the application itself. But just imagine how much money is being spent to develop such applications. Apple has NO RISK here. If the application does not turn out to work, it will have cost nothing.

And if it does work and become a hit, Apple will split revenues with the app creator. Isnt’ that the perfect business model? And there are no signs of this trend slowing down because Apple continues to gain market share thanks to its Iphone. And as long as it can break even on the Iphone sales (it does come out with a profit though), the business will continue to be a great one.

Apple shipped 7.4 million Iphones in the last quarter, that is 7.4 million users that will be buying all types of products through the Itunes store. The biggest danger right now for Apple would be to have a major rival come out with a superior product but there are no signs of that happening. The truth is that I think most competitors have almost given up on catching up with Ipod for the time being, it is too expensive and has shown little to no results. Both Sony and Microsoft gave it a shot but without any luck.

The next battle for Apple will be for the much anticipated Tablet, which could become as important of a product as the Iphone/Ipod. However for that medium, Apple will come out late with competitors such as Amazon’s Kindle already working well. So it will be a different challenge.

Does this mean that I am automatically a buyer of Apple? No of course not. Although I do currently have a live trade on Apple. Its valuation reflects most of these facts already. But it does give us ideas of what to look for in the “next Apple”.