Posts filed under 'Uncategorized'
Get rich schemes are a dime a dozen and all are designed only to enrich those who devised them. But in the Internet age, is there a way the average Joe can virtually guarantee a profit on an investment? The answer to this is no, unless you change ‘average Joe’ to millions of ‘average Joes (and Josephines of course).
Ponder this hypothetical. Google is currently the search engine of choice for two-thirds of Internet users in the United States and there are around 239 million such users. Search is still Google’s bread and butter, in fact most of their other successes have come from giving things away for free (e.g. gmail). In my opinion (this is a blog after all), Google leads the search market more by default than having a superior product to bing. I use both search engines and have each set as defaults on different computers. Often I’m not even sure which engine I’m using (particularly now that Google has added the preview feature that bing originated).
Based on the numbers above, if 35 million U.S. Based Internet users made the simple switch from Google to bing as their default search engine, the two would split the search market 50/50. This would change perceptions of both companies dramatically and would result in an increase in both Microsoft’s earning estimates and “acceptable” PE ratio.
As of this writing Microsoft was expected to earn about $3.00 per share over the next 12 months making it’s forward-looking PE ratio 10. If our hypothetical 35 million Internet users switched their allegiance over a 3 – 6 month period, it would be perfectly reasonable to see Microsoft’s projected earnings rise 10% and their PE ratio moving from 10 to 15. These very modest projections would translate to a market price per share of $50.00, 60% above it’s current price. A 60% increase on the purchase of 100 shares today would result in a profit of $2000.
There are problems with this strategy, however. The first being that while making a profit of $2000 is nothing to sneeze at, it’s hardly getting rich. And even this assumes that you could find 35 million people who could fork over enough to buy 100 shares. The second is that even when taking into account Microsoft’s average daily volume of 45 million shares, a purchase of 100 shares by 35 million people would represent 77 days worth of trading activity and would surely drive up the price of the stock. Even if this purchase activity occurred over a 3 – 6 month period, it would have in impact, how much of an impact is well beyond my expertise!
So perhaps there still is nothing as a get rich scheme. But the point of this hypothetical is that something like it could happen. Simply by coordinating their actions, millions of people can not only increase their wealth, but can hold the fate of large corporations in their hands.
Disclaimer: I am long Microsoft.
The information and opinions on this site are not meant to serve as financial advice. I am not a financial advisor. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional This site is merely intended to provide what I hope is interesting information and opinions.
May 19th, 2012
Since my last post on July 20th, the S&P 500 has fallen 15.5%. The decline really set into motion upon our fearless leaders agreeing on a debt limit deal. It almost seems as if the debt limit controversy was a distraction and once it was “resolved”, people began focusing on the current state of the macro-global economy.
The news has not been good. The events in Europe are starting to resemble a slow-motion train wreck. There is nothing anyone can do and it is hard to look away. Stateside, the economy is still looking feeble. While the latest employment report was not terrible, there seems to be a renewal of large layoff announcements by major corporations. Although the Federal Budget is expected to continue to run deficits, the latest agreement will result in reduced expenditures further pressuring state and local governments finances.
The prospect of reduced Medicare reimbursement rates is being reflected in the stock price of many companies. One example is Almost Family (AFAM). AFAM is a company I’ve had on the radar for quite a while but have never quite felt like pulling the trigger. Last year the home health care industry ran into the headwind of an investigation into billing practices. They had just started to emerge from this threat when presumably the debt limit deal has ignited the fear of reduced reimbursement rates from Medicare. As a result, AFAM has seen its stock price drop from the low 40’s just over a year ago to around 17.50 now.
Things to like about AFAM are its balance sheet and the fact there is no denying that demand for home health care is only going to rise over the coming decade. On the downside is the prospect of a profitless prosperity as the industry may be able to “grow” but see little in the way of profitability.
Another market segment that was ravaged recently was the small and micro-cap biotechnology and pharmaceutical industry. There appear to be a number of reasons for this, the first being the overall market conditions. But I believe there are several other factors likely at play here. These stocks tend to be very volatile and therefore often held by the most aggressive investors. Once these stocks start to drop, they can run into a flurry of stop losses set up (foolishly in my opinion) by individual investors. Additionally, margin calls can be triggered forcing some indiscriminate selling.
Former market darling Denderon (DNDN) reporting a disappointing second quarter with a relatively bleak outlook also took the steam out of this segment of the market. This news hit certain stocks also involved with cancer vaccines particularly hard (such as Celdex (CLDX) and Seattle Genetics (SGEN).
Note: since I first penned this (and prior to posting) I have added to my Celldex and Biosante positions. Of note, insiders for both of these companies have also taken advantage of the recent market swoon. Other stocks of interest are Synta (SNTA) and Dusa (DUSA). I had dumped my shares of Dusa too early last fall, only to see it rally from almost the day I sold. I’m still not seeing the growth in their Blu-Ray equipment that I would like to see however. I will be listening to their recent conference call before making a decision.
I was fortunate to have read this article prior to the recent selloff and decided to cash out my Immugen holding before the selloff. I was able to dump it at $14.93 and it now sits at $10.00. My return on that investment was almost 100%.
I also decided to dump the remaining portion of my LSI holdings. Again, I was fortunate enough to do this prior to the most drastic selloff and sold out at $7.40. LSI now sits at $6.58. Both IMGN and LSI have some momentum (LSI) or relatively near-term catalysts (IMGN) and I will consider getting back in if they drop further (and once the market begins to stabilize).
I have not been as fortunate with Corning (GLW). As I posted earlier, I bought more in the low $17 range and then again at $15.30. Corning continued to drop and now sits at a paltry $13.20. This is an example of one of my weaknesses. I tend to be too eager to jump on a stock after it takes a hit and I often catch the proverbial “falling knife.” Long term I think I’m fine with the holding but it is always hard to see how much better of a price I could have had if only I could have been more patient.
As far as future moves, I am still eying some media stocks. If we continue to see a sell-off, I may add Comcast to my holdings. I still think someone will want to buy Sprint at some point, but their debt level is keeping me at bay. However, if they drop much further, it may prove to be a worthwhile gamble. With AT&T and Verizon threatening to start extracting more from consumers of wireless bandwidth, I would think that obtaining access to wireless infrastructure would become appealing to someone, perhaps even Google.
While I sold off some of my AT&T and Verizon, I continue to hold a position for the dividends, stability and the fact that they largely control both the internet backbone and mobile computing infrastructure. Unlike internet access to the home, the FCC has, for now, placed fewer restrictions on the wireless carriers ability to monetize their wireless infrastructure.
The information and opinions on this site are not meant to serve as financial advice. I am not a financial advisor. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional This site is merely intended to provide what I hope is interesting information and opinions.
August 10th, 2011
On February 27th, I posted that I had taken up positions in three new stocks (Exar (EXAR), Biosante (BPAX), and Comverge (COMV). Thus far, the three have each gone their own way. As of today, EXAR is up 2.2%, BPAX is up 91%, and COMV is down 47%. Fortunately, I took more substantial positions in BPAX and EXAR.
The sell-off in COMV has subsided and it probably is not a bad time to accumulate some shares as the downside should be limited with a high probability of being able to turn a profit. While I have been tempted to do so, I have resisted because of the tentative nature of the global economy and because I think there are better places to put money to work. I will hold onto the small stake I have because of what is now a low risk holding and the fact that at this price COMV could be takeover candidate.
I have recently shifted some money around by selling a portion of my holdings in the following:
AT&T
Bristol Myers Squibb
CalAmp
I still hold positions in these companies but I wanted to take some profits and take up some new positions. At the time of sale, I was up over 50% with CalAmp, 25% with AT&T, and 13% with BMY. Those figures are excluding dividends received.
I am still maintaining a sizable cash balance as I’m not convinced that the dual threats of the European Union difficulties and the impact of state and local budget cuts are priced into the market. As I commented last August, state and local governments are continuing to cut to the bone (and into the bone), and this will continue to be a drag on the economy. Add to this the moribund housing market and all is not well for non-Apple shareholders.
This does not mean that I am cowering on the sidelines. I have recently taken a position in Nokia. I plan to dollar cost average into it. I wanted to take advantage of the recent dip (I bought in at $5.84), but did not want to commit too much, too early as Nokia’s earnings announcement tomorrow will probably not be well received. My thinking on Nokia is as follows:
It is not unusual for technology companies to fall out of favor. History is littered with such companies (Digital Equipment Corporation, Compaq, Dell etc.). Sometimes technology companies never recover from the forces that caused them to fall out of favor. Eastman Kodak is a current example of this. They ran into a brick wall of change and despite fighting admirably, have found that their nascent recovery entering the digital camera market is now being threatened by consumers increasingly relying on their smart phones for snapping pictures. But sometimes, companies do pull themselves up, it just takes time. Remember the early 90’s when IBM was written off? IBM’s stock fell from around $98 to $40 between April of 1992 and July, 1993. Today, the stock sits at $183. And in a now legendary turn of events, Microsoft purchased $150 million of Apple preferred stock to help keep a struggling Apple afloat; only to be surpassed in market value in 2011.
There is definitely risk with Nokia. The iPhone and Android are practically the only game in town in the smart phone marketplace. However, Nokia has one thing going for it that a company such as Research in Motion does not: their relationship with Microsoft. I know, I know, you are probably laughing right now about the Windows 7 phone. Yes, its footprint is non-existent at the moment. But I believe this will change with time. In fact, my delving into Nokia has also awakened me to Microsoft. While the general feeling is that Microsoft was yesterday’s technology darling, the people in Redmond have made some strategic moves that are not readily apparent but could set themselves up nicely down the road.
1. Microsoft gets royalties from every Android phone sold.
2. Microsoft has stakes in Facebook & Comcast.
3. Microsoft recently acquired Skype.
4. Bing is slowly making inroads in the search market.
5. Apple is aggressively going after manufacturers of Android via patent suits and at a minimum, may be able to extract royalties for each Android phone sold and could potentially inflict even more damage to the platform.
6. Google is under further pressure regarding their Android operating system due to a suit being brought by Oracle, seeking damages related to Java patents.
All this could add up to disruption to Android manufacturers or at a minimum, increase the cost of the phones, making a Windows 7 phone more appealing.
So the Windows phone is not dead. I would argue that it really hasn’t gotten started. From what I hear, Windows 7 is very sleek and user friendly. Could Microsoft find themselves in the same position as Apple was in for all those years, having a superior product that no one took seriously? If so, will they be able to forge a market for the phone?
Of course the Windows phone can be successful without Nokia benefitting, but it’s likely that the fate of both will be closely linked. A week ago, every article I read was that Nokia was dying. “Stay away”.. “it’s just in the process of experiencing a slow death.” When things are this dire, it often can be a time to buy. Interestingly, I’ve been meaning to blog on Nokia for about a week now, and starting just a day or two ago, I’ve been seeing some more positive press as Nokia’s earnings date nears. I’m hoping Nokia dips further after this earnings release because I think it will be at least 24 months before the verdict is in on their turnaround hopes and like I said, I’m in accumulation mode.
On a final note, I recently doubled my position in Corning as it dropped precipitously down under $17. As it turns out, I could have gotten in lower if I had waited a few days, but I’m happy getting in at &17.27. Additionally, I purchased some Cicso stock around $15.30 for my son’s college fund. And lastly, I bought a bit of a lottery ticket with Rosetta Genomics (ROSGD) – but more on that to come.
The information and opinions on this site are not meant to serve as financial advice. I am not a financial advisor. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional This site is merely intended to provide what I hope is interesting information and opinions.
July 20th, 2011
I may have to eat my words (perhaps for the rest of my life) but I’m thinking Groupon did Google a favor by not accepting their six billion dollar offer to buy the company. I’m just not convinced that Groupon has the staying power of some other internet juggernauts.
Perhaps after seeing the reception had by LinkedIn, Groupon recently filed for an initial public offering. Groupon is certainly the biggest name to come about in the last few years but I’m not convinced I’d want a piece of the action.
I signed up with Groupon a while back and have to say I’m a bit underwhelmed with what I’ve seen. Perhaps the service is more vibrant in other areas than my own, but most of the deals presented to me are for services that I have little interest in, such as kayaking trips and nail salons. I’ve also noticed that many (most?) of the deals are not even structured to utilize the founding concept of Groupon which is to offer special deals once a certain number of people agree to partake. This has seemingly resulted in Groupon being nothing more than an online coupon distributer. This is not a difficult concept to replicate and it’s also not one that I think retailers are going to continue to pony up a significant portion of their revenue to utilize.
I know Groupon (and others) are implementing the concept of making offers available to people based on their physical location as determined by their phone. But really, how swayed are people really going to be to stop what they are doing and run into a nearby store so that they can save a few dollars on an item they may or may not be in the market for? The concept would seem to be more effective for restaurants, but again, how interested are restaurants going to be in getting into a bidding war with their nearby competitors? And finally, how many advertisements are people going to want delivered to them as they drive or walk near participating retailers? This appears to be the case of implementing something because you can rather than being driven by fulfilling a need.
Factoring in the low barriers to entry for competitors, a likely diminishing profit per transaction and a consumer whose initial excitement of the concept is likely to wane, Groupon does not represent an attractive long-term investment.
June 16th, 2011
Despite today’s rally, I think a little caution is in order for investors. I took a look at a chart of the DOW Jones industrial average during the depression era and one thing stood out. After the initial big drop, what would prove to be a sucker’s rally ensued that brought the average back up to around the point we recently reached (proportionally) in the recent bull market rally. The subsequent several years after this rally saw the DJIA fall two steps down for every one step up on it’s way to what must have been an excruciating fall to levels that no one could have imagined in 1929.
To be clear, I am a firm believer that no one can predict where the stock market is going to go next, but I also do not subscribe to the theory that you should not try to “time” the market. I have been sitting with about 2/3 of my money in cash since prior to the 2008 implosion. Although I increased my holdings beginning in December, I did so only marginally and largely by selling some securities and then buying slightly more of others. I guess you could say I believe in always having a foot in the market so that you can participate in any and all rallys, and to buy dips and sell rallys along the way, all the while keeping some ammunition on the sidelines for those golden opportunities.
Perhaps more importantly are the trades I haven’t made lately. I recently bought both Google and Goldman Sachs thinking they had been beaten down and represented a good long term buy (which they probably still do). But I unwound both of them at small profits only to see them fall further over the last week. I’ve also been eyeing EMC, AFAM and CLDX, but have thus far been rewarded in eyeing and nothing else. I think I mentioned in a prior post that I also let some of my Applied Materials go at $14.32 after they announced their most recent earnings. At the moment, that’s turned out to be a good move.
Today I decided to let go of 80% of my Dover Motorsports (DVD) at a loss. As described earlier, this was an asset play where the only value is their two NASCAR sprint cup races and their primary facility. However, with NASCAR losing popularity (as measured by attendance at events) and the poor attendance at Dover’s May 16th race, the value of those assets appears to be on the wane. Too much so for me to hold on for what may be a very bumpy era in world finances. The the only thing that will save the is a buyout and I’m not sure if that will come in this environment.
I don’t think anyone should ever be completely out of stocks, but I’ve decided to set some very aggressive limit orders on the downside in the event that we witness more meltdowns like we saw during the flash-crash. Besides that, I’m willing to miss out on some upside in order to protect capital. There will likely be much better bargains to come. Patience is crucial, albeit painful at times.
May 21st, 2010
The Blog of Evermore is simply my outlet for talking about those things I find of interest. While there is no predefined subject matter, you will find many of the posts relate to politics, philosophy musings on the world, and the stock market.
I hope you find the site of interest; however, it is important for me to state the following:
The information and opinions on this site are not meant to serve as financial advice. I am not a financial adviser. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. This site is merely intended to provide what I hope is interesting information and opinions.
As for other subject matter, I will strive to keep commentary on a professional level and will keep away from disrespecting those with whom I may disagree. I hope and expect that anyone who chooses to reply will do the same. I of course, reserve the right to remove any content that I find objectionable.
Thank you and enjoy…Tim Holmes
April 18th, 2010
