A year ago, I was able to take a close look at a cool-looking electric-powered sports car. I even got to sit in it. I noticed that it was not made by a manufacturer that I had recognized—it was built by Tesla Motors, Inc. (NASDAQ/TSLA), but I really didn’t give it a second thought.
Well I wish I had now, as Tesla is seeing its shares supercharge on the price chart, up 70% in the first few weeks of May and 167% so far in 2013, based on my stock analysis. Tesla is up a sizzling 198% over the past 52 weeks compared to the S&P 500’s 23% increase.
My stock analysis suggests that the maker of the sharp-looking electric sports car has really shocked the stock market with its superlative price appreciation. Who would have known?
Chart courtesy of www.StockCharts.com
I thought Tesla was interesting and gimmicky in some ways, but never in my wildest imagination did I expect the stock to surge as much as it has.
According to my stock analysis, you can thank the short-sellers for running to the exits and unloading their positions in a classic short squeeze. At the end of April, there were 27.5 million shares of Tesla shorted. The share price was $53.99. Fast-forward 10 sessions, and the price has surged to over $90.00.
Now you can’t blame short-covering for all of the increase in the share price. Tesla did deliver some awesome numbers that tore apart Wall Street’s estimates, according to my stock analysis.
In the first quarter, Tesla sold 4,900 vehicles. That’s it. By comparison, General Motors Company (NYSE/GM) sold … Read More
The shares of Apple Inc. (NASDAQ/AAPL) have been on a steady climb since plummeting to $385.10 on April 19; but my sense is that the buying has largely been driven by retail investors and not from where it counts with the institutional money, based on my stock analysis.
Insiders and the institutional money are not as supportive of Apple, according to my stock analysis. Over the last six months, insiders have sold Apple in 10 transactions totaling 127,896 shares, while there was only one insider buy of 1,780 shares, according to information by Thomson Financial.
Institutional buying, which I believe is the key to stocks due to their knowledge on the companies, is also refraining from buying Apple, even at the much lower price. My stock analysis indicates that institutions have unloaded 27.8 million shares of Apple with institutional investors’ ownership declining 4.5% on a quarter-to-quarter basis, according to Thomson Financial. Some of the biggest sellers include Capital World Investors (-56.3% in Apple stock), Wellington Management (-48.9%), HSBC Holdings (-62.6%), and BlackRock Advisors LLC (-48.2%). My stock analysis notes that this selling suggests a lack of confidence in the company, even with Apple shares plummeting down more than 40% since the company’s high point.
Based on the lack of buying by the insiders and institutions, I would still be wary of buying Apple at this point. In my view, Apple is more of a trading opportunity than a buy-and-hold.
The reality is that following where the professional money is flowing gives us another tool to evaluate the stock market and get a sense of what is happening.
The concept of … Read More
Apparently, someone forgot to tell the market that Microsoft Corporation (NASDAQ/MSFT) was a dead investment and not worth buying.
Following a lackluster launch of its “Surface” tablet and “Windows 8” operating system, Microsoft quietly moved to a new 52-week high of $32.84 last Thursday.
In its fiscal third quarter, Microsoft reported revenues of $20.49 billion, now on target for fiscal 2013 revenues of $79.16 billion, based on the Thomson Financial estimates.
My stock analysis indicates that the current uptick in the stock price is being triggered by optimism toward the company’s focus on touch-screen computing and mobile devices, along with greater demand for Microsoft’s “Xbox” gaming platform.
Revenues in the company’s entertainment and devices division surged 56% year-over-year to $2.53 billion. The company is set to launch its next-generation Xbox, with its “Xbox LIVE” currently having over 46 million subscribers worldwide, according to Microsoft.
The upward move in the share price and its sustainability will be dependent on whether this former darling of Wall Street can recapture some of its former glory, based on my stock analysis.
One thing is for sure: my stock analysis suggests that Microsoft is no longer the intriguing, can’t-miss stock that it used to be.
Microsoft is not Google Inc. (NASDAQ/GOOG).
My stock analysis suggests that for Microsoft to steadily move higher, the company will need to generate higher revenue growth than the current 7.4% and 7.9% that is estimated for fiscal 2013 and fiscal 2014, according to Thomson Financial.
Microsoft trades at a lower valuation than Google, but this is due to Google’s much higher estimated revenue growth rate of 43.0% and 15.1% for … Read More
Bearish traders tend to short stocks and/or the equities market. While stocks subject to short selling are viewed as negative, I often take the contrarian view, and look at these shorted stocks as a possible buying opportunity due to the short-covering possibility.
Let me explain. With short selling, a trader disliking a particular stock would short the stock by borrowing the stock from his or her broker and selling it in the market at the prevailing price. The short-seller hopes the stock falls in price. For the short-selling strategy to pan out, the short stock must drop in price so that the short-seller can buy it back at a lower price and replace the borrowed position to the registered holder. The short-seller would profit.
In my view, looking at heavy short-selling stocks is a strategy to buy a stock that could have more potential than what the short-seller thinks. By taking this contrarian short-selling approach, you can often discover stocks that may be set for a short-covering rally in which you can profit.
For instance, online leader Google Inc. (NASDAQ/GOOG) is trading at over $800.00; however, investors continue to like the stock, as there are minimal short-selling positions on the stock at 1.6% of the float, or 1.4 million shares, as of February 15, 2013. (Source: Thomson Financial, last accessed March 14, 2013.) But note that a month earlier, there were 3.28 million short shares on Google, so the stock attracted some short-selling covering that helped to drive the stock higher, based on my stock analysis.
I normally would not look at a stock like Google as a short-selling buying … Read More
Google Inc. (NASDAQ/GOOG) is up seven-fold from its initial price and could be well on its way to being the first $1,000 stock. Another heavy-hitter is priceline.com Incorporated (NASDAQ/PCLN), at over $700.00 a share and sizzling on the charts. At a new 52-week high, eBay Inc. (NASDAQ/EBAY) continues to dominate the Internet retail space. The commonality between all three of these companies is that they are all leaders in their respective Internet space, based on my stock analysis. There are pundits suggesting the best years for the Internet stocks are now behind us. I don’t believe that.
In just less than four months, Groupon, Inc. (NASDAQ/GRPN) has more than doubled in value from its 52-week low of $2.60 on November 12, 2012. The company’s business model of providing daily deals on goods and services is interesting, but it is not immune to the rising competition from rivals, since the barriers to entry into this space are relatively low, based on my stock analysis. Unfortunately, my stock analysis suggests that while Groupon was an early entrant in its business, numerous companies are surfacing and pushing Groupon to defend itself by trying to offer an advantage for the user. As shown in the chart below, Groupon broke out at $5.50 resistance, but recently, it sold off with a downside gap after disappointing results; yet the chart shows a possible rally, according to my technical analysis.
Chart courtesy of www.StockCharts.com
My stock analysis indicates that not only does Groupon face competition from the likes of Yelp, Inc. (NYSE/YELP), Google, and Amazon.com, Inc. (NASDAQ/AMZN), but it now faces competition from eBay, which launched a … Read More
When it comes to long-term investing, many focus solely on revenues and earnings. While clearly these are extremely important fundamentals when conducting a stock analysis, one rarely mentioned but critical variable is pension liabilities.
Pension liabilities are, by definition, crucial to long-term investing, as costs are spread out over many years. Many investors conduct a stock analysis on a very short-term basis—quarter to quarter. Successful long-term investing means conducting a stock analysis on the next five, 10, even 15 years.
Pension liabilities are a huge issue for many companies. A pension liability is the difference between the amounts of funds the company has in reserves versus the expected payments to retirees. At the end of 2012, American businesses had an estimated combined pension deficit of $347 billion, according to JPMorgan Asset Management. (Source: Monga, V., “Why the corporate pension gap is soaring,” Wall Street Journal, February 25, 2013.)
JPMorgan estimates that, on average, companies have promised $100.00 to retirees, yet they only have $81.00 in reserves. That is a massive gap that needs to be taken into account when conducting a stock analysis for long-term investing.
This is an unintended side effect of the low interest rate environment created by the Federal Reserve. While companies can take advantage of low interest rates when borrowing, they can also end up having a shortfall in the long-term returns on their investments.
Companies are attempting to bridge the gap by adding funds to make up the shortfall. If interest rates stay low for a number of years, as expected, a stock analysis must take into account the increased provisions of cash used to … Read More
Michael Dell is no fool. After watching the declining demand for personal computers (PCs) and its disastrous impact on the PC makers, Mr. Dell had an idea: sell the company to private equity and let them try to convert Dell Inc. (NASDAQ/DELL) into a “mini IBM.”
The new Dell will be focused on serving the technology needs of large companies, which may include the possible divestiture of its struggling PC business. (Source: Gupta, P. and Damouni, N., “Dell to go private in landmark $24.4 billion deal,” Reuters, February 5, 2013.) A decade ago, International Business Machines Corporation (NYSE/IBM) followed a similar strategy after selling off its PC business to Lenovo Group Limited; so far, the move has been successful for IBM, according to my stock analysis.
The recent operating results from Dell suggest that its founder, Michael Dell, did the right thing. In the fiscal fourth-quarter earnings season, the company earned $0.30 per diluted share, down 31% year-over-year. Yet the red flag at Dell was an 11% decline in revenues. While the results narrowly beat the Thomson Financial consensus estimates, it’s clear that the PC business is dying, according to my stock analysis.
While the $24.0-billion deal is facing opposition from two major shareholders, Southeastern Asset Management and T. Rowe Price, that are both demanding more money, I really cannot see how this will happen. The results point to a company on the decline unless something is done; based on my stock analysis, there’s more of a chance of survival with private equity for Dell.
The strategy shift that is expected to take place is not a surprise, given the … Read More
For all of you who are attracted by the battered price of Facebook, Inc. (NASDAQ/FB), I suggest you keep on reading: Google Inc. (NASDAQ/GOOG) is the top player in the Internet space, in spite of it hitting an all-time record high of $776.60 last Friday, and here’s why.
My stock analysis indicates that some of you may feel that, at nearly $800.00 a share, Google is valued at way too lofty a price. Moreover, some may be spooked by the recent collapse of Apple Inc. (NASDAQ/AAPL) on the price chart after trading at over $705.00 a share in September 2012. What I would say to you is that Google is not Apple, and it’s definitely a much better company than Facebook, based on my stock analysis.
In fact, I think Google has more of an opportunity to reach $1,000 than Apple. Of course, that is if Google doesn’t undergo a stock split. I recall when Google first debuted in August 2004 at $100.00 a share, when I was debating in my mind whether the stock was a highflier or the real thing. At that time, Internet stocks were really still in their infancy.
The stock chart for Google below shows the stock’s upward trending channel and strong relative strength. But you need to be careful, as the stock could decline back to the area defined by the blue circle between $715.00 and the current price. A retrenchment into this space could signal a buy, based on my technical analysis.
Knowing what I have learned over the past eight years, I wish I had picked up some shares of Google; but … Read More
China continues to grow at a rate far above the levels seen in the other industrialized countries. And to fuel its expected superlative growth over the next decade, which could be the country’s golden years in spite of what some critics are saying, the country will need raw materials, based on my stock analysis.
The country has always been a major importer of raw materials, including metals, oil, and forestry, but my stock analysis suggests China is aggressively pursuing exploration in oil and metals. China has also looked to add resource companies via takeovers around the world in such places as Canada, the United States, and Africa in order to have some control over resource reserves, according to my stock analysis.
A recent example of this was the Canadian government’s somewhat surprising approval of the $15.1 billion takeover of Canada-based Nexen Inc. (NYSE/NXY) by China state-owned CNOOC Limited (NYSE/CEO) to go through. The deal was initially thought to be axed by the Canadian regulators and government, citing the security concerns of a takeover of oil reserves by the Chinese government-controlled CNOOC. Canada has rejected takeover bids from Chinese companies in the past, citing the need to safeguard its mineral and energy resources, so this deal was a surprise. Based on my stock analysis, I suspect Canada may have felt pressured to approve the deal, as the country wants to open up more trading with China; a rejection of this deal by the Canadian government would not have looked good in the eyes of the Chinese government.
The reality is that there will be compromises as far as acquisitions of foreign … Read More
The auto sector has been on a nice upward rally since trading at a bottom in July 2012, according to my stock analysis. Driven by low financing rates and rising domestic and foreign sales, we are seeing more carmakers taking the plunge and updating their older clunkers.
In January, auto sales were sizzling, with General Motors Company (NYSE/GM) and Ford Motor Company (NYSE/F) recording sales growth of 16% and 22%, respectively. Toyota Motor Corporation (NYSE/TM) also rallied, reporting sales growth of 27% year-over-year in January. (Source: Seetharaman, D. and Klayman, Ben, “GM, Ford post stronger-than-expected auto sales for January,” Fox Business, February 1, 2013.)
The numbers are estimated to be even better this year, so it would be an opportune time to accumulate some auto and auto-based stocks, based on my stock analysis. GM estimates that there will be between 15 million and 15.5 million autos sold this year. (Source: Ibid.)
Take a look at the stock chart for the S&P 500 Automobiles & Components Industry Group Index below. Notice the bullish ascending triangle followed by the breakout at the horizontal blue resistance line. But there is risk, as the index is currently facing support at the present level on weakening relative strength and a bearish moving average convergence/divergence, according to my technical analysis. Watch to see if the support level holds.
Chart courtesy of www.StockCharts.com
My stock analysis indicates that the auto sector has gone through major structural changes over the past few years since the bankruptcy of General Motors (GM) in June 2009. In the nearly four years since, my stock analysis shows that the auto sector has … Read More
Apple Inc. (NASDAQ/AAPL) was trading at $705.07 on September 21, 2012, and there were talks of the tech giant becoming the first trillion-dollar company in the world. That was then. The stock has since made a steady decline down to below $500.00, hitting a low of $435.00 on January 25; it’s trying hard to hold on and instill investor confidence. The sell-off was driven largely by concerns of soft “iPhone 5” sales. My stock analysis suggests that the profit-taking in Apple shares is not a surprise, given the stock’s enormous run-up in share price and the fact that rivals are clawing at the door.
My stock analysis indicates that ownership by institutional investors shows a 0.76% net sale of Apple stock over the last quarter-to-quarter, representing 4.8 million net shares sold by institutions, according to information by Thomson Financial.
Even CEO Timothy Cook sold some of his shares in Apple during the run-up, as my stock analysis notes. On March 9, 2012, he sold 17,322 shares for $545.17 per share, followed by another 20,178 shares for $547.80–$551.51 each a few days later on March 11, 2012. Two weeks later, on March 25, Timothy Cook sold 106,640 shares for $595.96–$606.80 a share for a total $64.1 million, according to data from Thomson Financial. If he had waited until September, he could have got $705.00 per share sold. Perhaps Cook was a bit nervous of the stock’s rocketing share price and wanted to reap some of the rewards. Maybe Cook needed the $85.0 million he received from his sales to invest in something a bit less frothy than Apple stock.
In fact, … Read More
I can honestly say that I’m excited to see the introduction of the new and highly anticipated “BlackBerry 10” (BB10) operating system and products by Research In Motion Limited (NASDAQ/RIMM; TSX/RIM) today. The overall market also appears hyped up on the BB10 platform. Research In Motion (RIM) has surged 176% since trading at $6.43 on September 21, 2012, as traders speculate on the company.
My technical analysis shows a widening gap on the chart on January 22 on a bullish moving average convergence/divergence (MACD) indicator (marked by the circles in the chart below), which is bullish. But watch the overbought condition. Also, the emergence of a bullish golden cross as indicated on the chart was a strong buy signal.
My stock analysis suggests that RIM appears to be rising out from the ashes, as investors dive back into the once-fabled maker of the BlackBerry. For RIM, it has been quite the journey after the investment community, including myself, thought the end was near for this former Wall Street star. Since the emergence of Apple Inc. (NASDAQ/AAPL), the BlackBerry and “Playbook” tablet have proven to be horrible failures, based on my stock analysis.
Chart courtesy of www.StockCharts.com
Based on what I have already seen, from what’s been leaked out on the Internet, the new BlackBerry has the familiar rectangular shape and touch screen feature of many of the most popular smartphones out there. RIM has aligned with many of the big carriers to market this product. The company is also looking at licensing out its software, which would be a first for RIM. The strategy appears to be in place; now … Read More
Have you seen the share price of Apple Inc. (NASDAQ/AAPL) lately? Since it traded at its record high of $705.07 on September 21, 2012, it has been a mess. Faced by rising competition, better products, and superior pricing, Apple has seen its price shaved by about 28.0% in what has been a trend reversal to the bearish side, according to my technical analysis. Apple is on the verge of breaking below $500.00, a move that was last encountered on February 16, 2012.
There are questions swirling around regarding the ability of CEO Timothy Cook to deliver the superlative revenue growth traders have been accustomed to in the past. The problem is with the rise of Samsung Electronics Co. Ltd. and Google Inc.’s (NASDAQ/GOOG) “Android”-based phones and tablets; the competitive environment has tightened, so Apple will need a “Plan B,” according to my stock analysis.
The slippage in Apple’s business is evident. Apple shipped 14.6% of the total smartphones shipped globally in the third quarter, versus 23.0% in first-quarter 2012, while Samsung’s shipments surged to 31.3% in the third quarter, according to International Data Corporation (IDC). (Source: “Apple Cuts Orders For iPhone Parts As Demand Slips,” Yahoo! Finance via Wall Street Journal,January 13, 2012.) The article also speculates that Apple is cutting its orders for parts used to build the “iPhone 5” due to lower demand.
Chart courtesy of www.StockCharts.com
In my view, Apple is in trouble, based on its global market share and declining revenue growth. According to analysts polled by Thomson Financial, Apple is estimated to grow its revenues by 22.2% in fiscal 2013, falling to a mere 15.1% … Read More
There has been so much focus on the fiscal cliff that I feel traders are ignoring the problems of slowing growth in corporate America.
The fourth-quarter earnings season begins tomorrow with Alcoa Inc. (NYSE/AA), the first DOW stock to report in this earnings season. Alcoa is one of the world’s top aluminum makers; the stock is also a good indicator for the global economy, as aluminum is used in many industrial applications, including aircraft, automobile, commercial transportation, packaging, building and construction, oil and gas, defense, consumer electronics, and industrial applications.
In the third-quarter earnings season, Alcoa beat on Thomson Financial consensus earnings, but its revenues are an issue, which will likely be the situation with many U.S. companies. For Alcoa, revenues are estimated to fall 6.3% in the fourth-quarter earnings season, followed by a 1.3% rise in the 2013 first-quarter earnings season, according to Thomson Financial.
For the fourth-quarter earnings season, the overall revenue growth is estimated to be three percent, according to FactSet (Source: “Earnings Insight,” FactSet, December 14, 2012, last accessed January 4, 2013.) This is simply not what you would expect if the economy was healthy. And while there is some hope and optimism for the fourth-quarter earnings season, I expect disappointment.
Based on the current estimates, earnings for the S&P 500 are estimated to rise three percent in the fourth quarter, according to FactSet. So far for the fourth quarter, 79 S&P 500 companies have issued negative earnings-per-share (EPS) guidance, versus only 30 companies reporting positive guidance.
The top-performing earnings growth predicted for the fourth-quarter earnings season is in the financial sector, according to FactSet.
The … Read More
Small-cap stocks will be a key driver of the broader market should the U.S. and global economies continue to improve. In 2012, small-cap stocks trailed only the technology sector as far as performance. The Russell 2000 has been advancing since the end of the first quarter, with its greatest advancement in December. If 2013 is a strong year for the economy, small-cap stocks will deliver.
My stock analysis tells me that what happens in January will be an important indicator for the year as far as performance. Historical records indicate that stocks have increased an average of 1.6% in January since 1969, according to the Stock Trader’s Almanac. In 2012, January was a strong month, so it was not a surprise to see the relatively good advance in stocks.
I favor small-cap stocks for long-term growth, as the valuations are more attractive and may be worth a look for aggressive long-term investors.
And while I view the holding of large-cap stocks as an integral part of a portfolio, for added overall portfolio returns, I like small-cap stocks. These stocks add to the risk component of your portfolio, but you are compensated by a higher overall expected return from your investments. You can increase the expected return of a portfolio by simply adding more risk. This is the advantage of adding small-cap stocks.
A standard and simple measure of stock risk versus the market is called beta—a quantitative measure of systematic or market risk that cannot be diversified away and is generally in relation to the S&P 500 or another market/benchmark stock.
A beta less than one implies that a stock … Read More
Happy New Year to all of our Investment Contrarians readers!
In 2012, small-cap stocks were the second-best performing group, following the technology sector. The Russell 2000 was the top performer in December and has been since the end of the first quarter. How the small-caps fare this year will, again, depend on the global economy.
My stock analysis tells me that what happens in January will be an important indicator for the year as far as performance. Historical records indicate that stocks have increased an average of 1.6% in January since 1969, according to the Stock Trader’s Almanac. In 2012, January was a strong month, so it was not a surprise to see the relatively good advance in stocks.
As we move into 2013, the focus will be on any remaining fiscal cliff fallout and the impact of the deal, along with the eurozone mess, the U.S. national debt, and jobs growth.
For 2013, my stock analysis is cautious to start the year, based on the high global risk.
The fact that the economy is triggering some jobs growth is encouraging. My analysis is that this will likely continue in 2013, although the unemployment rate is expected to remain relatively high at over seven percent.
My stock analysis shows that we need to see leadership from such areas as the financial and technology sectors. The big banks were strong in 2012, but we also need to see technology take a leadership role.
It definitely will be a tricky year, given the global and domestic issues, along with suspect earnings and revenue growth to start the first quarter.
Again, as I … Read More
What the heck is going on with Apple Inc. (NASDAQ/AAPL)? The stock has corrected 26% since trading at a record high of $705.00 on September 21, and based on my stock analysis, Apple has made a chart reversal in a bear market.
While the price chart shows two major downward moves, don’t panic yet, but be careful.
I still consider Apple one of the best stocks in technology, but the company is clearly facing increased competition in the lucrative tablet, mini-tablet, and smartphone markets. The stock was recently downgraded, but sales in China are encouraging after Apple launched its “iPhone 5” and saw over two million units sold from December 14–17. (Source: “iPhone 5 First Weekend Sales in China Top Two Million,” Yahoo! Finance via Business Wire, December 16, 2012.) The iPhone 5 will be sold in over 100 countries by year-end.
Its valuation is attractive at 9.04X its estimated fiscal 2014 earnings per share (EPS) consensus estimate of $57.83 per diluted share, according to Thomson Financial. Its price/earnings-to-growth (PEG) ratio of 0.5 is bargain-cheap, based on my stock analysis.
The chart is bearish, showing the stock’s recent break below the 50-day moving average (MA) of $578.67 and the move below the 200-day MA of $597.41, which represents a bearish “death cross,” based on my technical analysis.
Chart courtesy of www.StockCharts.com
My stock analysis is that there are clearly some concerns that Apple may not be able to continue on its merry way. Chief rival Samsung sold a staggering 97 million mobile phones in the third quarter, well above the 23 million iPhones sold by Apple, according to Gartner. (Source: … Read More
I just took a look at my friend’s Samsung “Galaxy III” smartphone and must admit that it looks pretty impressive compared to my “iPhone” by Apple Inc. (NASDAQ/APPL). However, the applications available for the iPhone are what will keep me from switching, at least for the time being.
Apple was trading at $705.07 on September 21, but the stock made a steady decline down to the $505.00 level on November 16 prior to rallying back to the current price of $578.00. Based on my stock analysis, there’s profit-taking in Apple shares, which is not a surprise, given the enormous rip-up in the share price.
My stock analysis tells us that institutional ownership shows a 0.76% net sale of Apple stock over the last quarter-to-quarter, representing 4.8 million net shares sold by institutions, according to information from Thomson Financial.
In fact, my stock analysis shows that technology and growth stocks have been the focus of the market selling so far in 2012. The NASDAQ is down four percent as of Monday, versus a 0.07% advance by the S&P 500 and blue chips.
What I’m getting at is that growth stocks are being sold by institutions.
Following where the professional money is flowing helps gives us another tool to evaluate the stock markets and get a sense of what is happening.
Behind the concept of following the money of institutional investors is the belief that these experts are likely to understand the company’s situation more than anyone outside of the executive management group. My stock analysis is that, by looking at the flow of money from institutional investors and monitoring what stocks … Read More
Hewlett-Packard Company (NYSE/HPQ) sank on Thursday after warning the market to expect less in 2013, as the former technology kingpin struggles to revamp its business.
The company has seen over half of its market-cap dissipate over the past year, rewarding the short-selling traders, according to my stock analysis.
CEO Margaret Whitman has a titanic job ahead of her, as she tries to turn the sinking ship around; but with crippling declines in the demand for PCs and intense competition in printers and other products, my stock analysis tells me that the path will be difficult and there is no guarantee of success.
My technical analysis of the chart of Hewlett-Packard (HP) tells the story of the company’s demise from a Wall Street darling to a misfit. Based on my stock analysis, the rapid switch between CEOs (there have been three since 2010 alone) has hurt the company’s business. HP had been in the retail tablet market, but it exited in August 2011 under the leadership of former-CEO Leo Apotheker, who took over in 2010 from Mark Hurd. Following the company’s departure from the tablet business, Apotheker was replaced by Whitman in September 2011, who now faces the daunting task of figuring out what to do to save the company.
Chart courtesy of www.StockCharts.com
According to Whitman, it will take years to turn HP around, as the company looks to streamline its product line and become a leaner, more efficient technology company. Yet, according to my stock analysis, the company’s lack of exposure in the surging mobile business is problematic. But this could change, as HP now has a dedicated group … Read More
Chipotle Mexican Grill, Inc. (NYSE/CMG) is one of my favorite places to grab a quick bite to eat. Yet, despite some stellar growth, the stock broke below $300.00 on Wednesday and has been steadily losing ground since trading at a 52-week high of $442.40 in April. Mounting concerns regarding future growth and multiple downgrades from analysts have hurt the stock. Hedge fund manager David Einhorn hammered another nail into the coffin when he said that Chipotle’s valuation “doesn’t make sense.”
With Chipotle Mexican trading at 28X 2013 earnings and with a price/earnings-to-growth (PEG) ratio of 1.7, my stock analysis is that the current valuation looks somewhat top-heavy.
According to my stock analysis, there are strong showings in the restaurant sector, especially in the fast-food area. A staggering 30% of the 96,000 new jobs generated in August were driven by the food-services sector, according to data from the U.S. Department of Labor.
The Bloomberg U.S. Quick Service Restaurant Index, which includes Yum! Brands, Inc. (NYSE/YUM) and McDonalds Corporation (NYSE/MCD), is up over 22% for the year to October 3.
Whether it’s eating out or cooking at home, the investment opportunity for food-related stocks is excellent, especially with the fast-food stocks, based on my stock analysis.
At the top of the fast-food chain, according to my stock analysis, is McDonalds, with over 33,000 restaurants in 119 countries, including sizzling growth in China. It plans to have 2,000 restaurants in place in China by 2013. Based on my stock analysis, McDonalds has been a top performer in the restaurant sector over the past decade after making a dramatic shift in its menu to … Read More
Imagine making money even after a takeover announcement. This is not as difficult as it sounds, as there is often a gap between the proposed takeover price and the prevailing price of the stock after the announcement is made. The reason is that there’s always a possibility a takeover deal could fall through, but my stock analysis is that you can make money on the spread difference in what is known as an “arbitrage trade.”
In general, the larger the bid–market price gap, the more risk there is of a deal possibly faltering. For instance, if a takeover bid is non-binding to the acquirer, the gap could be much higher than in situations when the bid is binding, costing the acquirer a large cancellation fee.
When the market price of the stock trades above the bid price, there’s a feeling that another higher offer may come through or the emergence of another bidder, according to my stock analysis.
My stock analysis is the biggest gap between the takeover price and market price following an announcement tends to be with the Chinese stocks and there are valid reasons why.
In the case of Chinese takeover bids, especially when they originate from insiders of the targeted company, my stock analysis is that there is always skepticism, as many of these proposed deals are non-binding and have very little as far as supportive documents for the bid. In other words, in the cases when a Chinese company is targeted by an insider, it’s akin to an idea that’s floated around by the proposed buyer and is not actually a concrete and supportive bid…. Read More
Israel is not widely known as a hotbed for start-ups, but this dynamic country of 7.9 million people situated on the Mediterranean Sea is just that. The country has the second highest number of start-up companies in the world, trailing only the U.S. There are over 120 Israeli companies listed on U.S. exchanges, including about 60 on the NASDAQ, which makes Israel second only to China on this index. However, a major difference is that Israeli stocks are more trustworthy than Chinese stocks, based on my stock analysis.
My stock analysis is that one of the top Israeli and best stocks listed in the U.S. equities market is pharmaceutical giant Teva Pharmaceutical Industries Limited (NASDAQ/TEVA; NYSE/TEVA), a developer of generic and branded drugs and active pharmaceutical ingredients.
Technology and healthcare are some of the leading industries in Israel, based on my stock analysis. My stock analysis shows that the country has seen a steady rise in technology companies that have performed well on the world stage.
I will mention a few that are good examples, but again, these stocks are not meant as specific investment advice and are more for information purposes, based on my stock analysis.
A small-cap technology stock that has excellent long-term potential for above-average price appreciation is Petach-Tikva, Israel–based ClickSoftware Technologies Ltd. (NASDAQ/CKSW), according to my stock analysis.
Founded in 1979, ClickSoftware creates solutions that allow companies to manage resources efficiently and effectively. The company develops and sells workforce management and service optimization solutions that allow companies to improve productivity, customer satisfaction, and cost effectiveness. Its offices are in Israel, the U.S., Europe, and Asia.
Chart … Read More
A casualty of the downward spiral in Internet stocks, Groupon, Inc. (NASDAQ/GRPN) cratered over 20% to below $6.00 on August 14 and all the way down to $4.00 on September 4; this was prior to the surge on Wednesday on what could be positive news regarding a new service called “Groupon Payments.”
Triggering the initial decline in the stock was a revenue shortfall of $7.0 million in its second-quarter earnings. This may not seem like much, as the company reported $568 million in revenues, up 45.0% year-over-year, but the market wanted much better results, based on my stock analysis.
Groupon was also wishy-washy towards its third quarter, with revenues expected to come in between $580 million and $620 million, which is a wide range that creates plenty of uncertainty for traders; but based on my stock analysis, there is also an opportunity. Groupon makes about 60.5% of its revenues from outside the U.S.; given the dismal situation in Europe, this makes the stock a risky opportunity, but I’m not ready to write off Groupon. I see a potential opportunity here based on my stock analysis.
My stock analysis is that those looking for a high-risk opportunity may want to take a look at Groupon, known for its daily deal offerings for a broad range of goods and services, including restaurants, and travel. Groupon will sell almost anything as long as it’s legal.
The purpose of the company and the way it makes money is to hook-up merchants to consumers via a local commerce marketplace; this marketplace caters to the user’s selected “home” area by offering deals for goods and services … Read More
The People’s Republic of China has a population of over 1.3 billion people and a rapidly growing consumable-hungry middle class of over 300 million people. The Goldman Sachs Group, Inc. (NYSE/GS), an investment bank, predicts China will become the largest economy by 2040.
The Organization for Economic Cooperation and Development (OECD) predicts China will grow its economy by 8.2% this year, but rebound to 9.3% in 2013. While China’s GDP growth is lower than the previous year’s, it is well above the global economic growth averages of 1.6% and 2.2% in 2012 and 2013, respectively. (Source: OECD, www.OECD.org/china.)
In my stock analysis, the rapid growth of the China’s middle class will be key. In a research finding, Credit Suisse predicted that the household wealth in China will double to $35.0 trillion by around 2015, based on achieving sustainable GDP growth at or near the current levels.
A strong area for growth investors will be the Internet sector in China, based on my stock analysis. This country is the epicenter of the Internet world, with online demand growing at a staggering pace. My stock analysis suggests there is strong potential in this area.
The number of Internet users in China is tops in the world, with 585 million on the Internet at the end of June, according to the China Internet Network Information Center (CNNIC). By comparison, the next four largest Internet countries were the U.S. (245 million), India (121 million), Japan (101 million), and Brazil (82 million), according to Internet World Stats.
Internet users commonly roam the Web via their smartphones. The number of mobile Internet users in China was … Read More
The markets for smartphones and tablets are fiercely competitive. At stake are hundreds of billions of dollars and that means riches for the market leader.
Based on my stock analysis, the king of tablets at this juncture is Apple Inc. (NASDAQ/AAPL), the global market share of which is around 69% in the second quarter and it wants to hold on to its share. (Source: ABI Research.) In a recent court ruling, Apple was awarded just over $1.0 billion from Samsung Electronics Co. Ltd. (KRX/005930), which has an eight percent market share, after claiming that Samsung’s smartphones and tablets look and feel like Apple’s “iPhone” and “iPad.”
The positive ruling was a win for Apple, even if the company doesn’t really need the money. Going forward, my stock analysis is that market rivals will be reluctant to make products similar to those of Apple.
Apple, which I still consider one of the best stocks in technology, will face increasing competition in the lucrative and surging tablet and smartphone markets, based on my stock analysis. Currently, Apple is the market leader in the booming tablet market.
The global market for tablets is estimated to rise to around $31.9 billion this year with over 100 million units delivered, according to Visiongain. IHS iSuppli estimates that about 360 million tablets will be sold by 2016. Apple knows this, which is why the company took Samsung to court; Apple wants to hold onto its market leader status.
According to my stock analysis, Apple had better keep an eye on Amazon.com, Inc. (NASDAQ/AMZN), which has the size to fight Apple. Amazon.com’s market share expanded to 22% … Read More
The global travel industry is on an uptrend, with China rapidly becoming one of the top travel markets in the world for both domestic and international travelers, according to my stock analysis.
To deal with the increased travel, the country has been steadily building its road, rail, and air infrastructure that will make traveling in the country much easier for both domestic and international travelers. China has spent hundreds of billions on its railroad.
“China is the most attractive place in the world right now for hotels. That’s why investment capital is racing there and why the major international brands are racing there too,” said Patrick Ford, president of U.S.-based Lodging Econometrics. (Source: time.com)
China is the fourth top destination for tourism, but it is expected to become the number one destination by 2020, according to the World Tourism Association.
According to a research report, “China Tourism Industry Forecast to 2012,” on traveldailynews.com, China will see major growth in its domestic travel from 2011 to 2013.
China’s burgeoning travel industry is understandable. With a population in excess of 1.3 billion people and a rapidly rising middle class with money to spend on travel, the potential is significant, based on my stock analysis. Plus, there are the millions of foreign travelers with money to spend who have made Asia and China the premier travel destination for business and leisure. And, as wages increase, so will the spending on non-essential items, such as travel and recreation.
To handle the expected increase in travel, there is a push to build more hotels and motels across the vast country.
In the Chinese travel and … Read More
China has been growing exponentially in many areas, but while there is some stalling, an area that continues to expand at a staggering pace is the mobile phone sector. The growth is enormous with the number of subscribers surpassing one billion users. Let me put it another way: there are more mobile users in China than the populations of the United States, the European Union, Mexico, and Canada combined!
These are exciting times for China’s mobile market where three major carriers dominate the market, according to my stock analysis.
The adoption of 3G and 4G networks will help to drive additional growth in the country’s mobile phone market due to the need for new phones, based on my stock analysis. At the end of May, there were about 167 million mobile 3G users in China, up 126% year-over-year, according to Topeka Capital Markets. Growth in 3G is expected to continue rapidly.
Apple Inc. (NASDAQ/AAPL) is a major player in China, with sales in the country accounting for about 20% of total sales in the second quarter, and this is expected to rise. My stock analysis is that the potential is significant as Apple only has 10% market share of the Chinese smartphone market.
The income demographics in China support the spending. In a recent research finding, Credit Suisse predicted that the household wealth in China could double to $35.0 trillion by around 2015, based on achieving sustainable GDP growth at or near the current levels; albeit, the current slowing will impact wealth but will still allow consumers to spend on more non-essential goods and services, such as mobile phones, according … Read More
The verdict is in, and it doesn’t look good for the personal computer market. Dell Inc. (NASDAQ/DELL) knows this and so does Hewlett-Packard Company (NYSE/HPQ).
Sales of personal computers (PCs) in the U.S. plummeted by 11% year-over-year in the second quarter, according to International Data Corporation (IDC). The decline was six percent based on research by Gartner, Inc. (NYSE/IT), but this figure was based on sales of PCs and laptops. On a global basis, PC shipments fell 0.1% year-over-year, but the Gartner research indicated it was the seventh straight month of declines or slight increases. Based on my stock analysis, the PC is in deep trouble unless PC makers can re-invent the PC and laptop to challenge the tablet.
You can attribute the fall of the PC to the superlative rise in tablets, according to my stock analysis.
The global market for tablets is estimated to rise to around $31.9 billion this year with over 100 million units delivered, according to Visiongain. By 2016, it’s estimated that about 360 million tablets will be sold, according to IHS iSuppli. By comparison, global PC shipments are estimated at 528 million in 2016, according to IDC. In the U.S., PC sales came in at 71.3 million in 2011, down five percent year-over-year and the first decline since 2001.
Users want tablets, not hybrids or smaller-sized laptops. Hewlett-Packard had been in the tablet market, but left after feeling the death grip of Apple Inc. (NASDAQ/AAPL). Research In Motion Limited (NASDAQ/RIMM), previously viewed as a chief rival, has made numerous miscalculations with the constant delay of new products and a struggle to find itself, according … Read More
Many of us cannot start off the morning without a cup of coffee. I know I can’t.
Coffee prices are showing some life after nine straight months of contraction, according to data from the International Coffee Organization (ICO). The price of coffee rallied in July 2012 with the ICO composite indicator surging up 9.5% versus June.
My stock analysis is that the fundamentals also look promising on the demand/supply end.
World production is estimated at 131 million bags in 2011 and 2012, which is lower than the 138 million bags predicted to have been consumed in 2011, as shown on the chart.
Source of statistics: International Coffee Organization
Chart © Lombardi Publishing 2012
In the equities market, my stock analysis is that Starbucks Corporation (NASDAQ/SBUX) is the dominant player on the retail side, especially with its aggressive growth strategy in China.
While I do like Starbucks as a long-term play, based on my stock analysis, mid-cap coffee wholesaler Green Mountain Coffee Roasters, Inc. (NASDAQ/GMCR), a producer of higher-end specialty coffees and single-cup brewing systems, has a better risk-to-reward profile.
Green Mountain sells hundreds of varieties of coffee, tea, and other beverages that are used in single-cup brewing machines, including the company’s “Keurig K-Cup Single Cup” brewers. Green Mountain also offers whole bean and ground coffee in bags.
Green Mountain coffees are sold under the Van Houtte, Brûlerie St. Denis, Brûlerie Mont-Royal, and Orient Express brands. The company also licenses coffee from Bigelow and Wolfgang Puck.
Yet this former high-flying stock has been under extreme pressure on concerns of increased competition in the single-cup coffee business and its bagged coffee sales…. Read More
When spending on fast food slows, you have to take note. This is the case with McDonalds Corporation (NYSE/MCD), a bellwether for the fast food industry, after the maker of the “Big Mac” reported a 0.1% decline in July in its key same-store revenues for stores opened at least 13 months. It was the first decline in years and well below the 9.6% reading in December. In my stock analysis, this shows a global cutback in spending, even on fast foods.
The company is feeling the impact from Europe, where it derives about 40.0% of its system-wide revenues. Revenues in Asia-Pacific, the Middle East, and Africa are also down.
My stock analysis is that McDonalds has been the top performer in the restaurant sector over the past decade after the company made a dramatic shift in its menu, offering to include healthy meals and broadening its target market. While there are clearly healthier foods on the menu, the demand continues to be largely for burgers, “McNuggets,” fries, and soda.
However, this strategy shift worked, as McDonalds is at the top of the fast-food chain at this juncture, leaving Burger King Worldwide, Inc. (NYSE/BKW) and The Wendys Company (NASDAQ/WEN) behind, according to my stock analysis.
Yet, based on my stock analysis, the current stalling in revenues has been impacted by a growing list of rivals that all have targeted McDonalds as the company to emulate and, hence, try to take market share from.
In the key and growing China fast-food market, McDonalds operates about 1,500 stores (aiming for 2,000 by 2013), but, in my stock analysis, the company faces tough competition … Read More
The S&P 500 topped 1,400 on Tuesday for the first time since May 3. The upward move was also the fourth top above 1,400 since 2008. In January, my stock analysis estimated the S&P 500 could test 1,400 this year, so the upward move has come a bit early.
Some in the media are even whispering about 1,500, but the last time the index was at this level was in October 2007 at the historical high.
The word “overextended” comes to mind at this juncture, based on my stock analysis. The fact is that since the amazing climb of the S&P 500 from 1995 to 2000, the index peaked on two separate occasions in 2000 and 2007, at above 1,400 and 1,500. And my stock analysis is looking at whether the current run-up from 2009 is sustainable and whether the index is heading for its third peak since 2000. You cannot tell at this moment, but, as the S&P 500 edges towards 1,561 (last achieved on October 8, 2007), it should become clearer, based on my stock analysis.
That high point may be tested in 2013 if the S&P 500 can rally another 11.5% from the 1,400 level. Again, it will be interesting to see if the index can break higher to a record high.
I’m not even convinced 1,400 will hold by the year-end, based on my stock analysis.
Following the break at 1,400 in March, the S&P 500 retrenched and failed to hold on two subsequent attempts at 1,400 in late April and early May.
The reality is the market is betting on a resolution and calm returning … Read More
I recall looking at clothes maker Guess Inc. (NYSE/GES) when the company was quickly tanking and trying to turn its fortunes around from 2001 to 2003. You could have purchased the stock for $1.78 in March 2003. What intrigued me about the situation was the strong brand awareness of Guess. My stock analysis was Guess could rally if management improved operations. This materialized as the company reported stronger results, and in the process, the stock surged to over $48.00 in September 2007, up 2,597% in just over four years.
A similar situation happened with Apple Inc. (NASDAQ/AAPL), rising from the $1.00 level to over $600.00, where the stock currently sits.
Unfortunately, my stock analysis cannot say the same for “BlackBerry” maker Research In Motion Limited (NASDAQ/RIMM). Since the company first started to show cracks after reporting weak results and constantly delaying the release of its new BlackBerry, I questioned the company’s ability to execute. My stock analysis was that, given the cutthroat competition in smartphones and tablets, Research In Motion (RIM) acted as if it was still in the 90s when it was at the top of the personal digital assistant (PDA) market with its real-time e-mail BlackBerry PDA. But 20 years later, the competitive environment has changed. The problem is that RIM failed to take notice of this and let time slip by.
My stock analysis is that this horrible execution forced the company’s two co-founders, Jim Balsillie and Mike Lazaridis, to resign. In came new CEO Thorsten Gerhard Heins, but so far it’s been the status quo, as RIM has already delayed the launch of the next-generation BlackBerry…. Read More
While the economic data have continued to come in worse, the S&P 500 has strengthened over the past few months. What is the stock analysis that can justify such a move, and is it sustainable? These two questions are critical for those interested in investing in stocks. There are several reasons for why the S&P 500 is at current levels, and it starts with how stock analysis is conducted.
The first thing to remember when investing in stocks is that the market is a forward-looking mechanism. That means that the current economic environment is not as important as what will happen 6–12 months or more into the future. Proper stock analysis needs to take this into account and try to understand where the winds will be shifting.
Even in this weak world economy, there are several points of interest for those interested in investing in stocks. First, we have central bank activity. Question: is it more or less likely world central bankers will be adding monetary stimulus before the end of the year? I think it’s quite apparent that at least some central bankers will be increasing monetary stimulus. This is seen as a positive when conducting stock analysis.
While the Federal Reserve might wait for the September meeting to enact further monetary stimulus, if that were to occur it would be a positive when it comes to stock analysis. I also think the European Central Bank (ECB) and even the Chinese financial authorities will also add additional monetary stimulus; again, these are further positives when it comes to stock analysis.
A huge worry for those interested in investing in … Read More
I’m not trying to be facetious by saying China loves General Motors Corporation (NYSE/GM); in spite of what you may think, this statement is correct.
There are numerous buy side analysts who still dislike the stock despite the progress made over the last few years since the company went through bankruptcy and made a major overhaul of its operations and product lines.
GM sold over nine million vehicles in 2011 and accounted for 11.9% of the global market share. In the first quarter of 2012, GM sold 2.3 million vehicles and trailed the 2.5 million sold by global rival Toyota. In the U.S., GM’s market share fell to 17.5% in the first quarter, the lowest U.S. share in about 90 years.
But what’s ironic is that if it were not for China, GM would likely be hurting, according to my stock analysis.As I said, the Chinese love their GM cars; the brand is considered to be prestigious and much more favorable than the Chinese-made clunkers.
Based on stock analysis, the Chinese auto market has been slowing, especially following the decision of the government to eliminate credits for fuel-efficient cars in 2011.
Apparently, there are just too many vehicles on Chinese streets, and having been there, I can say with confidence that driving on China’s roads is an adventure.
The slowing in the Chinese auto market is evident, based on my stock analysis.
In the first quarter of 2012, auto sales fell 1.2% in China. In 2011, auto sales increased a tepid 2.5% year-over-year to 18.5 million units, down from staggering 30.0% and 50.0% growth in 2010 and 2009, respectively, according … Read More
Social media is hot and growing, but making money from it is another story.
Whether you blog, tweet, or meet face-to-face in the virtual world via Skype, “FaceTime,” or Facebook video chat, social networking has vast opportunities.
In the case of Facebook, Inc. (NASDAQ/FB), my previous stock analysis, prior to the much-anticipated and overly hyped Initial Public Offering in May, was that the stock was the most hyped-up issue since the debut of Google Inc. (NASDAQ/GOOG).
Just over two months into its life as a public company, Facebook is already facing scrutiny and, based on my stock analysis, continues to be way overvalued.
Social media may be hot but clearly Facebook is not—this is my opinion based on my stock analysis.
Facebook has a loyal following of over 955 million users. This is great, but the company needs to figure out a viable way of how to monetize its users.
The 955 million users are impressive given the short eight-year history of the company, but the real growth will be the ability of the company to get into China.
My stock analysis is the company needs to drive revenues from its users the way Google has done with its advertising and other broad Internet services and assets. Google is well into its development as a top Internet company. The company just launched a high-speed Internet service in some parts of the U.S. that could pay dividends.
Facebook will likely evolve over time given its access to capital, based on my stock analysis, but for the time being, I question the market value assigned even after the collapse of the stock … Read More
Investors in Chesapeake Energy Corporation (NYSE/CHK) have been on a massive roller coaster ride. While external forces, such as the drop in natural gas prices, have hurt the shares, another negative not factored into the stock analysis has been CEO Aubrey McClendon. When someone is investing in stocks, you are essentially backing the management of that firm with the assumption that shareholder interests are being addressed. Investing in stocks is difficult enough, but having a CEO who is acting contrary to shareholder interests makes the situation that much worse. McClendon has made a lot of poor choices with regard to his management style and, frankly, has made strange decisions that were only in his best interests, causing much volatility and heartburn for those trying to do an effective stock analysis.
This is a warning sign for investors who are doing their stock analysis: don’t ignore management by only looking at the company’s assets. One must look at the organization as a whole. Shareholders have been so upset at the poor governance that four directors have resigned and McClendon has relinquished his role as chairman.
McClendon not only borrowed $1.1 billion against his stake in the company, but he also ran a $200-million hedge fund that traded the same commodities as Chesapeake. Performing stock analysis is impossible with hidden loans and secret hedge funds. McClendon’s blatant disregard for shareholder interests has caused the shares to stay depressed for an extended period of time. While McClendon has agreed to step down as chairman, his reckless financial behavior has cost shareholders billions. Investing in stocks is not easy as it is, so a … Read More
When people first start getting into stock analysis, some of the biggest investor mistakes involve getting caught up in the hype. To be successful over the long term when making a stock analysis, one must avoid the common investor mistakes that lead to extremely expensive errors, some from which you may not recover. While no one is perfect, the key to long-term success is allowing only small mistakes and avoiding the large investor mistakes that most people make. A perfect example is currently evident in some of the early warning signs regarding the Facebook, Inc. (NASDAQ/FB) initial product offering (IPO).
Facebook has come a long way and I think what it has done as a company is great. However, looking at the stock analysis of the business, there are many questions that still need to be answered. Investor mistakes occur when the public doesn’t do a thorough job of stock analysis, only scratching the surface. Recent news that General Motors Company (NYSE/GM) is stopping its advertisements on Facebook is something to consider. Yes, General Motors is only one firm, but considering that it spent $1.8 billion in advertising last year is certainly something you should look at when doing a stock analysis of Facebook.
Facebook’s valuation is extremely stretched to begin with on any stock analysis metric. Now it has the largest advertisers pulling from its site. In addition, the number of insiders selling their stakes in Facebook is extremely large, a big warning sign when doing stock analysis. Most of the early investors have increased their allocation to be sold at the IPO. Valuing the company at current levels … Read More