Archive for December, 2010

Quick news – December 21 2010

By: ispeculatornew | Date posted: 12.21.2010 (9:38 pm)

Tech news: (concern the stocks we follow)

Amazon (AMZN) is said to be on pace for 8 million Kindle sales in 2010
Apple (AAPL) announced it expects of sale of Apple TV’s to top 1 million this week
Amazon (AMZN) rated a new “Outperform” by Macquarie
Ebay (EBAY) rated a new “Neutral” by Macquarie
Google (GOOG) is said to be loking to buy one of the smaller Groupon clones after the failed takeover

Best return:  Adobe (ADBE) +6,01%


Worst return:  Research in Motion (RIMM) -0,41%

If I were Yahoo CEO Carol Bartz for one year… (YHOO)

By: ispeculatornew | Date posted: 12.21.2010 (5:00 am)

With the holidays around the corner, we decided to do a mini series about a few of the tech stocks that we follow all year long. We are the first ones to judge and critic how these companies are run but as they say, it’s always much easier to critic it then actually run a company. So we decided to go ahead and write a series about what we would do with these companies. Hoping you will enjoy the series:

Dec 20    If I were Google CEO Eric Schmidt for one year…
Dec 21    If I were Yahoo CEO Carol Bartz for one year…
Dec 22    If I were AOL CEO Tim Armstrong for one year…
Dec 23    If I were Facebook founder Mark Zuckerberg for one year…
Dec 24    If I were Apple CEO Steve Jobs for one year…
Dec 27    If I were Ebay CEO John Donahoe for one year…
Dec 28    If I were Amazon CEO … for one year…

Management in the past few years

Yahoo is probably at the very top of companies that I think are being round into the ground right now. Comparing any company to Yahoo is as offensive as anything I could say and there is no doubt that Yahoo has a lot to do in order to get back in order. Things have been run so badly for years that one year at the top of Yahoo would be quite a challenge. Just think about the fact that Microsoft could have paid about twice what the company is worth a few years ago  when the company had not yet fallen off the cliff. The problem at Yahoo is that it tries to be decent at everything instead of being great at a few things. There are a few properties that have been managed well and Flickr is certainly near the top of that list.

General Vision

-Become a relevant and innovative player on the web in the social, local and entertainment spheres.

Initiatives/Priorities I would get started on

Get Rid of Carol Bartz: Carol Bartz has been a major disruption, has lost the confidence of her employees and senior management which have been leaving the company at a quick pace. I would start by getting rid of her and explaining the new Yahoo to all employees: “We will no longer be a jack of all trades but become the King of just a few”.

-Expand from Flickr: Yahoo is lucky enough to have a hot property that continues to shine despite everything else. It could be the starting point from which Yahoo gets a decent presence in the crucial social web. Moving slowly is critical to avoid alienating users. I think first on the list would be making it easier for users to share their Flickr content, to give users the ability to build a “profile page” similar to what Facebook has and make it easier for Yahoo users to communicate from Flickr. Facebook has never been afraid to make changes as it improves and I think Yahoo should do the same with Flickr

Stop working on Games: Yahoo has had a good presence in online games for some time but has recently fallen off a bit to players like Zynga. I think the recent alliance with Zynga is the good thing to do. Games are too complex to be a focus for Yahoo and should be provided through alliances with Zynga and similar players.

Put focus on Yahoo Finance: Yahoo Finance remains one of the leading finance websites on the internet despite being almost exactly the same that it was 5 years ago which is incredible. Yahoo created a powerful website that attracts very attractive and valuable users but has been slowly losing them as the product continues to fall behind competition. Yahoo should use the workforce that was working on Yahoo games to improve the finance website with better charts, data, more social capabilities and an improved look.

Email: Make it more social, and start innovating. Yahoo Mail has one of the largest user bases of any email service and that should warrant hundreds of engineers working on improving the service. Spam detection, better organization, new features (viewing photos received or shared by email?). While Google has been rolling out improvements to Gmail every few weeks, Yahoo has remained the basic service that it was a few years ago.

Buy Yelp (cost of approximately $265M): Yahoo’s strategy and focus on local is relevant and should be a major focus in the next few years. Buying Yelp would be a major first step in getting the commercial/business point of view. That could be integrated with what Yahoo is now building in terms of local news and information. Yahoo has a strong community presence in much of the US and the world and getting strong in hyperlocal websites will help it remain relevant.

Get rid of Alibaba: Yahoo is not an ecommerce player and should not try to pretend being one. Buying a stake in Alibaba was a great business move but it should now be sold at the right place. Yahoo shareholders do not want to own a holding company.

Buy Yodle (cost of approximately $250M): Yodle is a leader in local advertising which should be a major focus for Yahoo in the near future. Local is one of the two critical parts of the future for most internet companies (with mobile) and Yahoo has a major edge in local. Buying Yodle to improve its advertising capabilities and sales force is critical.

Classifieds: Yahoo’s strong presence in local and its strong traffic should make it a much more important player in the classifieds/listings business. I would put the focus on market share through innovation, free listings, and high traffic in order to gain back some market share.

Any thoughts or ideas?

I would love to hear your thoughts or ideas regarding all of these initiatives!

Disclaimer: I am currently short Yahoo (YHOO)

Quick news – December 20 2010

By: ispeculatornew | Date posted: 12.21.2010 (4:32 am)

Tech news: (concern the stocks we follow)

AOL (AOL) has acquired About.me
Adobe (ADBE) reported earnings of $0.56 (est $0.52) on revenues of $1.01B (est $988.3M)
Netflix (NFLX) is rated a new Neutral by Goldman Sachs
Ebay (EBAY) is acquiring brands4friends, a German fashion website

Best return:        Orbitz Worldwide (OWW) +4,54%


Worst return:          AOL (AOL) -2,16%

If I were Google CEO Eric Schmidt for one year… (GOOG)

By: ispeculatornew | Date posted: 12.20.2010 (5:00 am)

With the holidays around the corner, we decided to do a mini series about a few of the tech stocks that we follow all year long. We are the first ones to judge and critic how these companies are run but as they say, it’s always much easier to critic it then actually run a company. So we decided to go ahead and write a series about what we would do with these companies. Hoping you will enjoy the series:

Dec 20    If I were Google CEO Eric Schmidt for one year…
Dec 21    If I were Yahoo CEO Carol Bartz for one year…
Dec 22    If I were AOL CEO Tim Armstrong for one year…
Dec 23    If I were Facebook founder Mark Zuckerberg for one year…
Dec 24    If I were Apple CEO Steve Jobs for one year…
Dec 27    If I were Ebay CEO John Donahoe for one year…
Dec 28    If I were Amazon CEO … for one year…

Management in the past few years

It’s no secret, I am an admirer of Google and have even called myself in love with the company. That being said, I still have issued worries about the way things were headed, even comparing the way Google is evolving to Yahoo (certainly not a compliment). I generally like Google’s long term vision and the way it refuses to manage with a short sighted vision. I have also been a critic regarding Google’s attitude towards the Chinese government which has resulted in more or less being shut out of the most important growth opportunity.

Android has been the biggest success story in the past 2 years as it has emerged as a strong leader at the center of the smart phone world. It is not clear yet how Google will profit from Android’s incredible success but I think it’s fair to say that Google will benefit tremendously from having Android as the leading operating system and will likely be Google’s next billion dollar business.

General Vision

-Google should be at the center of the web experience, no matter where it takes place (computer, mobile, etc) and how it is done (internet, video, application, maps, etc)
-Google should be a leader in data collection, organization and be able to resell the output from that process

10 Initiatives/Priorities I would get started on

Youtube advertising: I think there is a golden opportunity for Youtube to launch a competition or tournament that tries to determine the best ads on the internet. The initial goal would be to give entertainment to the users. Think about it. A large part of the audience of the Super Bowl (the largest audience for a yearly event anywhere on the world) is there to watch an event and to see interesting commercials that will then be talked about. Why not try to create another similar but “internet only” event. Over time, this could grow and become a very profitable venture for Youtube …!

Google has been involved in discussions to buy Groupon for $6 billion. As I argued recently, I think buying Twitter for more or less the same prices makes much more sense both from a commercial point of view as well as for its social strategy

Keep the attack on Microsoft: Google has been attacking Microsoft from almost all angles and the upcoming emergence of Chrome as an operating system is bound to be another major attack.

Launch marketing campaign about “Cloud computing”: Google and Amazon would likely be the two biggest winners if businesses and personal users started moving their data and applications to cloud computing. It will likely happen but if I were Google, I would try to get it done as quickly as possible. The marketing campaign should explain the numerous benefits for users and highlight the work that Google has been doing to further secure that data.

Monetize Google Maps: Many different things could be done to help Google get more out of its dominant maps business. First off, more visibility could be offered to local businesses that pay a premium. As well, coupons could be made available. How? A user looking for restaurants in a city like New York could see the restaurants that are around but also download coupons or deals from the maps website. Business owners would be paying to put those up in a similar way to what is now being done on search results.

Start webhosting business: Google is one of the more efficient companies at managing incredible loads of traffic. Why not start selling that expertise by letting companies host their web data on Google’s fast & secure servers?

Launch Financial Data service: We have discussed this in the past. Billions are spent in the financial sector for information. Google has access to a very large proportion of data that companies like Bloomberg are reselling and has other data (about users) that Bloomberg does not have access to. I think this could easily become a billion dollar business if done right. Simply start by selling the data at a very reasonable price in order to get a better idea of what users are looking for. Prices can then be increased slowly over time.

-Launch wireless internet + phone/internet service: This is an ambitious project but I think that over time, Google is a player that could get this done. Start offering high speed wireless internet access throughout the US by starting in a few locations and expanding quickly. Would it be free? No, but it would be a very attractive bundle. Example? Sign up for 49.95$ per month and get internet access + your mobile phone service (unlimited) using Android. This would help Google expand its presence both in the wireless space

Health system: The health system is one of the largest areas of spending everywhere in the world, it is growing and no where is that more true than in the US. I think Google has a tremendous ability to get data and organize it in a more efficient manner. Helping users track the best insurance companies by not only tracking premiums but exactly what is covered could be a great way to tap into an emerging market. The growth of Google Health could also be a great way to gain insigths

Sell Data Analytics: Is there an outbreak of a specific virus? What are young teenagers looking for when they search for clothes? What are the movies that users are reading about? Google has the largest set of data and could easily repackage a lot of it in order to be sold. An example? Political candidates could certainly benefit from gaining information about what their constituents are looking for, what they are worried about, etc.

Work on government contracts regarding data & apps: Google has spent a lot of time working on comparable products to what Microsoft has been offering for over a decade. It’s now time to start getting some contracts from governments and from large corporations that will benefit both the consumer (cheaper & more efficient alternative) and Google (recurring income).

Increase lobbying spending: No matter what you think, Google’s dominant presence in all kinds of different markets is creating enemies that will likely be using different monopoly laws to try to slow down the search giant. I would continue to work on getting “support” from the government.

Any thoughts or ideas?

I would love to hear your thoughts or ideas regarding all of these initiatives!

Financial Ramblings

By: ispeculatornew | Date posted: 12.18.2010 (5:00 am)

Just one week to go before Christmas, I certainly hope that you are almost done with your gifts!! Yesterday I discussed Mark Zuckerberg and how I consider that he is not the vilain that many consider him to be! He was actually selected as the Time person of the year! Congrats to him!

Here are some good readings from the past week!:

Why companies pay dividends and why some others should do the same @ TheDividendGuyBlog
Day trading outsourced to China? @ NY Times
3 major dividend toymakers @ Dividend Monk
3 profitable ways to invest in the market in 2011 @ Beating The Index
Giving to charity – Sustainability for the soul @ SustainablePersonalFinance
Why Passive income is so important @ TheFinancialBlogger
China the bull case & China the bear case @ Balance Junkie
No jobs? Young graduates create their own @ NY Times
10 lessons of the Madoff ponzi scheme @ The Big Picture
Mutual fund manager of the decade @ CNN
Create a fixed income, do not confuse return with revenue @ DoNotWait
2010 Ipad app of the year @ TechCrunch
Am I living the Google lifestyle? @ Blog Maverick
CFA: Your Last 24 hours @ SmartFinancialAnalyst

Facebook’s Zuckerberg is no vilain

By: ispeculatornew | Date posted: 12.17.2010 (5:00 am)

Mark Zuckerberg founded Facebook a few years ago while studying at Harvard in what is now a very famous story thanks to Ben Mezrich’s “Accidental Billionaires” and the movie that was inspired from the book; The Social Network. If you have not read the book or seen the movie, I highly recommend doing so. Both will give you an inside look at how a tiny operation started by a few friends became the largest social network in the world. Facebook has been called all kinds of things both good and bad. The bottom line though is that as I wrote recently, I think Facebook is going to be relevant for a very long time and represents the best investment opportunity out there. The big problem of course is that it’s a very difficult investment to make given the fact that the company remains private.

Mark Zuckerberg’s story has been made very public and by all accounts he wasn’t an angel. He had to go to courts and give out both money and recognition on more than one occasion. There have been countless rumors regarding hisAs well, Zuckerberg’s Facebook remains on a thin and grey line regarding privacy. Also, since Facebook is gaining power and influence very quickly, there have been a lot of worries regarding his role in the company.

Social Network Trailer

Give him a break

I’m not saying that some of his mistakes were not serious. But Zuckerberg was 19 when all of this started. At 19 years old, most of us did things that we would prefer not be public. Professional athletes and hollywood celebrities have provided countless examples of bad behaviour, bad examples and how money and fame could get to someone. That is not to excuse what Zuckerberg did for he does deserve some blame. But I don’t think he should be held to the same standard that we expect from a typical CEO.

He is looking more executive-like

As young and irresponsible as Zueckberg once looked, he is looking more and more like an executive. Mark recent gave an interview to 60 minutes that you can see below. He behaved like most Sillicon Valley executives and even looked mature when you consider that he is 26 years old.  As well, Facebook’s progress in recent months and its ability to stay on course and focused on growth and on the user experience rather than making the quick money has been very impressive.

60 minutes video

Charity

A few weeks before the release of the Social Network,  Mark Zuckerberg made a $200 million donation towards the New Jersey school system. It was seen by some as opportunistic and by others as noble. But a lot of doubt remained. I hope that last week settled the debate about Zuckerberg’s intentions. He became the youngest member to sign the “Giving Pledge“, the Gates/Buffet initiative that has been gathering pledges by billionaires to give away over 50% of their net worth to charity over their lifetimes. Sure, he has enough money to do it. But do you really think that he needed to do this? No, he clearly did not.

In the end

I think it’s easy to set Zuckerberg is the vilain given his role, his numerous errors and all of the legitimate worries about Facebook. But I think he deserves credit for what he has been doing in the past few years both with Facebook and with his personal holdings. Is he making the world a better place? I would say he clearly has been.

Quick news – December 16 2010

By: ispeculatornew | Date posted: 12.16.2010 (8:08 pm)

Tech news: (concern the stocks we follow)

Research in Motion (RIMM) announced earnings of $17.4 per share (est $1.61) on revenues of $5.49B (est $5.41)
News Corp’s MySpace renewed its ad deal with Google (GOOG)
AOL (AOL) acquired Pictela
Microsoft’s (MSFT) Bing gained 0.3% of search market share to 11.8% while Google (GOOG) dropped to 66.2% and Yahoo (YHOO) to 16.4%
Microsoft’s (MSFT) Kinnect is a huge success selling over 100,000 units per day

Best return:      Travelzoo (TZOO) +4,21%


Worst return:            AOL (AOL) -1,74%


Why you need to worry about Big Pharma in your dividend portfolio

By: ispeculatornew | Date posted: 12.16.2010 (5:00 am)

Among the top dividend stocks that I post every month, many of the top payers are pharmaceutical companies that are in the business of doing research, inventing and then marketing drugs that will solve all types of problems. These companies typically have strong balance sheets and certainly look like very attractive dividend stocks. We decided to take a deeper look into these stocks to see if they were worth holding in a diversified dividend portfolio.

On the surface

Strong dividend yield

No doubt, these companies offer very attractive dividend yields. The 5 companies that I will discuss here pay between 3.75% and 5.78% of dividend yield, strong numbers no matter what industry you are looking into. The fact is that these companies are healthy, profitable and paying great dividends.

Three of these companies have also increased their payout over the last 5 years and could increase it much more in the coming years.

Strong balance sheet

Often, strong dividend payers have fragile balance sheets which makes them vulnerable to rises of interest rates or any slight downturn in their business. That is not the case for these 5 companies which have very little debt. They can sustain pretty much anything that will come at them in the coming years and still be in business.

Solid profits

Not only are these companies paying high dividends and they a straong balance sheet but also these companies are very profitable. Despite paying a lot of money out to shareholders, these companies still have low payout ratios as they continue to make much more than what they are paying out.

Let’s take a look at top big 5 of Big Pharma that pay dividends:

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Beneath the surface

Expiring patents

Many of the big pharmaceuticals make all opf their sales and profits from just a few products. Those products are sold exclusively for a few years while the Drug companies hold the patents but those patents do come to expiry at some point and the sales & profits take a majore drop when the patent comes to expiry. For example, next year, Pfizer’s patent on Lipitor, a cholestorol drug comes up. The drug brings in sales of over $12 billion which will take a major drop. The other big pharma companies also have similar patents coming to maturity which will mean a big hit for the revenues and profits…

Lack of new products

That would not be a problem if the big companies were coming up with enough new products to replace the expiring patents. But that is not the case. Despite huge R&D budgets, they have been unable to come up with cures to problems like aids or cancer which means that the sales of drugs for the upcoming decade will likely be much lower. It is a huge problem and all the big companies seem to be stuck with this issue. Of course, if there was an easy solution, these companies would implement it. But visibly, there isn’t. That has left these companies with few options; all of them will have major impacts on the future of the pharma business.

Acquisition costs going through the roof

One of the ways that these companies have tried get around expiring patents and declining sales is buying smaller companies that either have valid patents or are in advantaced stages of promising products. One such example would be French company Sanofi-Aventis which has been going after Genzyme. The problem is that these small companies are not easy to find and they are very expensive to buy. When a company looks like a promising target, all of the big ones jump on board trying to find ways to get access to the products either through alliances or even better, by acquiring the firms. It is far from clear that these companies will be able to replace their existing lines of products and if they are, it will probably come at a very steep price. How will it affect future dividends? Difficult to say. But it’s not all green, I can tell you that.

Uncertainty of US legislations

The ongoing changes in the US health system are bound to have consequences on the drug companies.The US pays more to these companies than anyone else. On an absolute basis but also on a relative basis. Will the changes affect the pharmaceutical companies? No doubt. But it’s difficult to say how it will affect them. I don’t know that the changes will be bad because everyone has an incentive in getting these companies to invent new cures. But the US is currently paying a very large share of that cost and that might change in the near future.

Good but only to an extent

In my opinion, the conclusion is not to avoid pharma companies but rather to avoid a high concentration of pharma stocks in a dividend portfolio.Those stocks, like financials, carry their load of risk right now. They are good dividend payers and might remain so in the future. But be careful and do not include most of your stocks in this portfolio.

Top Names

Abbott Laboratories

Bristol-Myers Squibb Co

Eli Lilly & Co

Merck & Co Inc

Pfizer Inc

Disclosure: We do not hold positions on any of these names

The best investment of my life

By: ispeculatornew | Date posted: 12.15.2010 (5:00 am)

Close followers of this blog will not be stunned to find out what the best investment of my life has been so far. After all, I have written about the current valuations of digital properties or “digital real estate” and how cheaply these valuations were currently going for. It’s not a secret, there are many opportunities in the internet/mobile space right now and I consider myself lucky to have joined in on time. Have I peaked your curiosity yet? No, I’m not talking about an investment in Google from a decade ago (although that would have been a solid investment too), or even Facebook (I have not found an ideal way yet). It’s obviously not MySpace or Yahoo. So what is it you might ask?

M35 inc.

Does that name not ring any bells? Yes, I have to admit, it is a small company with a few part time employees, one full time employee and freelancers… so how could that be the best investment I’ve ever made? Did I load up in shares through a major cash investment? Not quite. In fact, I purchased 5 shares of the company for the equivalent of $7000. That was 2 years ago… If you have not yet figured out what I’m talking about, I mean the online company that owns this blog, TheFinancialBlogger, TheDividendGuyBlog, DoNotWait and a few other properties. We manage everything from our basements but things have been going very well.

So how could 5 shares be such a great investment? Well, in fact there are only 10 outstanding shares so a 50% ownership isn’t too bad right? Maybe at some point we will need to split the shares if we need or want to get other investors in but for now, a 10 share structure is perfect for us.

How good is the investment?

If you want to find out more, information that we publish (we are not disclosing all properties) is mostly available on TheFinancialBlogger. We wrote a post about the year that just ended (our fiscal year ends at the end of June) where revenues jumped from $18K or so to almost $120K! Most of it was either reinvested into the company but the flows of paid expenses that I get every month would be a great return if I got only that per year.. just think about it. If I invested $7K 2-3 years ago and it’s now generating close to $1000 per month, that is a 15% monthly return.

Of course, there is much more involved. The better part of the return is not the paid expenses but the actual value of the company. It has been growing fast and is now worth between $150,000 and $200,000!! As a 50% owner, the value increase of the shares is over 1000% over 2.5 years alone.

Why even bother with the stock market?

I think it would be very easy to consider that investing in the company is the only investment worth the effort. But I am far from thinking that. Like any other business, it involves risk and the environment or landscape could change in the next few years depending on legislation, innovation, etc. For that reason, both personally and soon as a company, we are diversifying with stock market and real estate investments that will give us a better shot at being ok no matter how things turn.

I do have to be fair though

While the investment in terms of money has been incredible, it has been a lot of hard work from both my partner and I but also all of those are have and continue to work on our different ventures. It is not a full time job (we have day jobs after all) but it is significant enough to not be considered a hobby anymore (even though it’s as much fun if not more).

I guess time will tell how much this investment will evolve but in the meantime I’ll take my certificate for 5 shares of M35 and store it in a very safe place…!

How about you, what has been the best investment of your life?

Quick news – December 14 2010

By: ispeculatornew | Date posted: 12.14.2010 (6:16 pm)

Tech news: (concern the stocks we follow)

Yahoo (YHOO) is going ahead with layoffs of between 600 and 700 employees
Dell (DELL) will buy Compellent, a data storage company for $960 million
Google (GOOG) was riased to “Outperform” by Wedbush
Research in Motion (RIMM) cut to “Neutral” by BNP Paribas
Research in Motion (RIMM) raised to “Outperform” by FBN securities
Shanda Interactive (SNDA) cut to “Sell” by Deutsche Bank
Apple (AAPL) was added back to Goldman Sachs conviction list as a buy with a price target of $430
Apple (AAPL) was removed from Morgan Stanley’s list of “Best trade ideas”

Best return:         MakeMyTrip (MMYT) +2,32%

Worst return:              Blue Nile (NILE) -3,33%