Scared face

Google Android Dominates the Global Smartphone Market

Today I published an article on Seeking Alpha praising the dominance of Google’s Android operating system over Apple’s and others and offered a thesis as to why that will continue going forward. (Read Article)There were quite a few opinions to the contrary, as I expected, so I am following up that article with a few comments on the comments.

First, let me start by saying Seeking Alpha outlines many reasons why someone would be interested in writing articles on Seeking Alpha. One of those reasons is to offer up an article to a sounding board of 3.2 million people. I admit, I am not a good writer, and unfortunately, I don’t have an editorial board to confer with. Therefore, I admit, I’m often curious to get feedback from the masses. People I don’t know, who don’t hold back….at all. My friends and family could never be so direct.

So because Seeking Alpha doesn’t allow an author to put the cart before the horse by floating a ‘draft’ of an article before it gets published, articles get published that could probably use some editing. Kinda like apps on Android ;)

Facebook logo

Facebook: A Great Company, But The Pullback Doesn’t Make It A Great Buy Yet

  • Great companies are relatively easy to identify but they can go through challenging periods and expensive valuations.
  • In Facebook’s case, it is difficult to evaluate a proper price target because of its short history.
  • Relative to peers and optimistic estimates, the stock currently looks expensive.
  • The pullback may not be over, so investors would be prudent to wait until there is confirmation of another upward trend.

 

How can you go wrong investing in Apple (AAPL), Google (GOOG), General Electric (GE), or Microsoft (MSFT), you might ask? They are great companies with competitive business models and we could assume they are going to be around for a very long time. But sometimes, all of that good news is already reflected in the price. With Facebook (FB), that certainly seems to be the case.

Porters Five Forces: Industry Analysis

Industry Analysis using Porter’s Five Forces Model

Frameworks

There are a number of different frameworks available for business analysis. One of the most recognized of these frameworks is called Porter’s Five Forces and is used to analyze the five forces that determine the competitiveness and attractiveness of a particular industry, to identify the major players in the industry, and to summarize the interaction amongst all the players.

The framework is named after Michael E. Porter, a professor at Harvard University whose core field is corporate strategy. He is considered by many to be the father of corporate strategy due to his early and insightful work on the subject.

Porter’s five forces is not a blanket solution for understanding a company’s place in its industry, and it does not necessarily require in-depth quantitative analysis. That being said, the more detailed the analysis, the higher the benefit you will obtain from a deep understanding of an industry. It is however, a simple but powerful framework, which if applied correctly, can help you identify opportunities and threats within an industry.

The look of an investor evaluating bonds trading above par

Getting Past Premium Bond Prices

Investing in fixed income seems to be straightforward: An investor buys a bond with a face value of $100, receives semi-annual coupons for the life of the bond, and receives the face value of the bond at maturity.

Besides the investor looking to ‘trade’ bonds for a quick profit, most bond investors are looking for either income, preservation of capital, or a combination of both. For these investors, if bonds were always trading at 100, life would be easy. If a bond always traded at 100, for example, the expected return on that bond would equal the amount of the coupon.

But bond prices fluctuate just like any other security, and although they do not have the price volatility of equities, bond prices can deviate quite a bit from their initial issue price, affecting the expected return, or yield to maturity on the bonds.

It is this deviation from par that many bond investors find challenging. Ironically, the problem isn’t so much when prices are below par, but rather, when the price of a bond is above $100. You see, many investors are philosophically opposed to paying more than $100 for a bond. The concept of paying $110 for a bond today and receiving only $100 at maturity, even if maturity is many years away, would imply a loss of capital of $10. The coupons received over the years are either forgotten or ignored.

Ford

Ford: Waiting Until It Hits $15 May Result In A Missed Opportunity

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Crown Crafts: Increasing Brand Awareness While Riding A Wave Of Consumer Confidence Results In 44% Upside Potential

Crown Crafts: Increasing Brand Awareness While Riding A Wave Of Consumer Confidence Results In 44% Upside Potential

Crown Crafts (CRWS)has had relatively flat revenues for the past 10 years. It’s expertise in designing some of the best bedding in the infant and toddler market is lost under the veil of licensing. But no more, the company has almost doubled it’s share of company branded sales over a 4 year period from 20% of total revenue in 2009 to 37% of total revenue in 2013. A recent trip to Babies R’ Us and Wal-Mart confirmed the increase in shelf space attributed to Crown Craft’s brands. And now that the company has improved its margins through the use of cheaper raw materials, the only thing missing is revenue growth. Revenue growth that will be directly incremental to profit and earnings.

Unfortunately, the birth rate in the U.S. has slowly declined to a multiyear low due to the financial crisis, weak labor market, and falling consumer confidence. But now that the economy is starting to pick up, consumer confidence, which is a harbinger of birth rates, has shown evidence of optimism among the U.S. population. While the labor market chugs along slowly, we may be at the beginning of a possible increase in birthrates, which, when combined with greater brand awareness, can finally push revenues past the $100 million mark. Add a shareholder friendly dividend policy initiated in 2010, and the stock could provide a total return of 45%.

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GE: The Recent 7% Pullback Is An Opportunity To Increase Positions

It’s difficult to properly describe GE (GE), or for us old timers, the former General Electric Company. What started in 1878 as a pure play electric company, or more specifically, a light bulb company, has gradually evolved over the last 100+ years into what is considered a global conglomerate. But GE is so much more than that. We can’t walk 10 feet without touching or listening to something produced by GE.

Does this mean the stock is a good buy at any price? Absolutely not. A smart investor will still look for short-term pullbacks in the stock to add or increase positions. With the recent 7% pullback and particularly while the S&P 500 has remained flat, the opportunity to invest in GE may be now.

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Hewlett-Packard Has Upside But Barron’s Is Too Optimistic

Barron’s published an interesting article on Hewlett-Packard (HPQ) this weekend and highlighting the wonderful job Meg Whitman has done to turn the company around. According to Barron’s, the stock has 20% upside over the next year and is selling at a substantial discount to its long-term value and relative to peers.

On several metrics, Barron’s forecast actually looks conservative. But the stock of a company whose revenues are declining even while cash flow is holding steady needs a catalyst. And with earnings expected to increase just 4% in 2014 and 3% in 2015, price appreciation will have to come from multiple expansion. Hewlett Packard does trade at a discount to peers and Barron’s argues that it should trade at a higher multiple. I agree, but think it will take a little bit longer than Barron’s anticipates.

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Bank Of America: Not Just A Dividend Growth Story, It’s Undervalued

Bank of America has been lauded by analysts as a great investment opportunity now that it is has more flexibility to return capital to shareholders in the form of dividends. This flexibility, in and of itself is reason to buy the stock, but it’s not the only reason. The stock is currently undervalued and has a 22% potential return over the next two years.

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Google: Optimism Is Built Into the Current Price

It’s not hard to imaging investors being googly eyed over Google (GOOG). The stock is up from about $100 in 2004 to a high of $1228.88 in February. Getting 12 times return on your initial investment over a 10 year period could be a once in a lifetime event. It’s no wonder investors keep trying to figure out not if to buy more Google, but when to buy more Google.

When I saw the chart below I became hopeful that it had pulled back just enough to take another nibble. The RSI indicated that the stock had reached oversold levels. Meanwhile, the price had dropped below the 2 standard deviation Bollinger band and then flattened out. On a technical basis, it looked good.