February 27, 2007
Apple: The Rebuttle - Why Apple is Not As Good as Everyone Says it is
Apple is a company that has been around for a long while, and their stylish products have set them apart recently. They are the dominant player in the mp3 player market, and their iTunes store is top of the line in the online music store industry. Their newest product announcement, the iPhone has generated a great deal of positive press, and people worship the former hippy turned business man Steve Jobs like he is God. Many see all of these things as positives, but I would disagree. Lets start with Mr. Jobs. Steve Jobs is part of an options backdating probe, and, while most say "oh he'll get away with it, he's Steve Jobs," I ask you this: what better person could the SEC find to make an example of? No one, thats who. People think Jobs can do no wrong. Maybe I'm wrong, maybe he can. maybe he isn't just a mere mortal, and maybe I'm the Queen of England. I will say this with absolute certainty, Steve Jobs is getting old, and at some point he will step down. What happened the last time he left Apple? Bad things, and their company was absolute garbage until Jobs came back. Without Jobs, Apple is nothing. So, what's wrong with the iPhone? Well, it is over priced and overrated. I seem to remember some news coming out about a certain product called Vista, which was greatly hyped, but the roll out is not going as well as everyone had expected. I expect the same thing to happen with the iPhone. At $399 or $499 each, I just can't see anyone buying them in any gigantic volume that people are expecting. Business people like their Blackberrys, and if people are hoping that they'll be able to get a big deal on an iPhone, like $200 off with a new 2 year plan, they're out of their minds. It is not going to happen. Also, the iPhone isn't really all that innovative. "Oh, but it has a touch screen!" Who cares? That is just one more thing for me to scratch. Let use that and ignore the fact that it isn't even a 3G phone, so it is limited in its ability to connect using the latest generation of wireless technology. Sure it has wifi, but if I am using a cell phone, why would I be excited to only be able to use real high speed when I'm by a wireless access point? I don't have anything bad to say about iTunes, I think that that is a quality business, but the iPod I will say something about. The iPod has saturated the market, what happens when you saturate the market and max out your market share? People stop buying your stuff. What does that mean? Slower earnings growth. Some will dismiss me as a non-believer in the glorious story that is Apple and that I'm just being cynical. Perhaps they're right, but you'll make a lot more money if I'm right because there are a lot more of them than there are of me.
February 19, 2007
Searching for a Hospital Buyout
Every now and then hospitals become attractive buyout targets because of their strong cash flow and capital expenditure. However, they do not come without risks as they sometimes face collection problems from insurers and various health programs. In the last month Triad Hospitals was taken private by principal investors CCMP Capital advisors and by a entity of the Goldman Sachs group. When the buyout tool place of Triad Hospitals, there stock rose about 15%. However, as others look towards finding another Hospital buyout there are few options left as two of the three biggest publicly traded chains have gone private. However, one company that still seems to be a worthy investment is Community Health Systems (CYH).
Why does CYH look like a buy?
With their earnings call just last week, Community Health 4th quarter profits rose by 11%. Recently, shares have been accumulated by financial institutions which are a favorable signs for a large company like Community Heath that has a 3.6B market cap. Furthermore, compared to its competitors it had the lowest PEG at 1.09 and the highest quarterly earnings growth, however, its PE at 22 is a little higher than the industry average. In the upcoming months I see CYH as a moderate growth stock with larger rewards possible if it comes under consideration for a buyout.
February 18, 2007
Evaluation: Brasil Telecom Participacoes (BRP)
Brasil Telecom Participacoes, a holding company that whose major asset is Brasil Telecom S.A. drives revenue by providing landline calls, data transmission, internet, and wireless services in Brazil.
Institutional ownership at 38.70%, a healthy market cap of $3.12 billion, and operating cash flow (ttm) of 1.10B indicate some establishment and high probability of growth as Brazil develops. Quarterly revenue growth of 5.80% (yoy) demonstrates a potential upward trend, one that has not incurred a run-up in price, yet. For short-term gains on BRP a beat of 1.96 but only a 52-week change of 4.70% are also good signs. Other solid indicators for future growth include a price to sales ratio of 0.64 and a price to book ratio of only 1.24, both illustrating solid business foundation and a lag in pricing correction for company’s sales.
Tied to volatility and potential instability of Brazil, there is and will be for the near future uncertainty that is not caused by anything within BRP, rather Brazil as a whole. Debt of $2.57 billion and a debt to equity ratio of 1.018 are cause for concern about ability to sustain future growth. However, over the next year a current ratio of 1.545 does indicate, at minimum, stability.
BRP is a good growth and value stock with above average financials. Analyst recommendations, according to Thomson and First Call, range from $43.00 to $62.00 with mean and median price targets of $52.01 and $50.85 respectively. Considering that BRP currently trades at $42.98, this company has room and reason for growth.
February 17, 2007
DaimlerChrysler: Dr. Z's New Vision
This Wednesday, DaimlerChrysler's Dieter Zetsche announced that the auto maker would be slashing 13,000 jobs and be closing one plant. This is yet another big hit to the struggling US auto industry. Press releases have hinted at a possible spin off of the ailing Chrysler unit, and recent reports have suggested that DaimlerChrysler and GM are currently in talks. These announcements have lead to a near 15% increase in DaimlerChrysler (DCX) shares.
I think that the strategy that DaimlerChrysler is proposing to cut costs is a fantastic idea. Cutting workforce and output will go a long way to decreasing their growing inventories which simply are not selling. As far as Daimler-Benz is concerned, the spin-off of the Chrysler wing is a best case scenario. It will give the high quality luxury car company a great cash injection. I would say though this this is not the time to buy into the stock. I would wait for a pretty good pull-back to load up on it if I were to buy any at all. The real trade here I think is to short GM.
GM buying Chrysler would simply be a terrible idea. They would just crank out the same old uninspired run of the mill junk, and Americans would just end up with 3 more brands (Chrysler, Dodge and Jeep) that are the same car with a different exterior. Never mind the fact that GM cannot even fix its own problems. GM's current loss of $16.95 per share, while significantly better than its former $18+ loss, is still nothing to be happy about. The thought of a company like GM taking on MORE debt to buy another money losing car company just seems absurd to me, and if the deal actually goes through GM then totally reeks of mis-management. The fact that reports like this have surfaced would make me dump my GM shares if I had any.
Now, I know what you're thinking. "Well if that is such a bad idea, that what do you think should happen big guy?" I would say this, and this would not only be the best case scenario for Chrysler, but for Ford and GM, too, Chrysler needs to be taken private. If there is anyone that can fix the problems of one of these ailing car companies it is the buy-out kings at all of these big money PE firms. Not only would this be more likely in my mind to save the ailing Chrysler, but it would leave a blueprint for GM and Ford to find their ways back to profitability. In any case, only time will tell.
Why Apple is a buy
When people think of stylish products, innovation and COOL, APPLE is the company that comes to mind. Six years ago apple introduced the I-Pod, it was instant hit sending the stock from a low of about $10 to the just recent high $96. Apple's Steve Jobs is a tremendous innovator and leader. Everyone from Main Street to Wall Street respects him. Recently, Apple introduced the new i-phone.
The stock was trading at$82 and with the announcement it jumped to almost $98. The next day, the stock saw a huge sell off taking it back to around $84.
In my opinion the stock was oversold. There was one reason the stock should be at that level and its the SEC investigating Jobs on options backdating. He and apple have power and this issue will be solved. The i-phone will be huge success.
The stock is trading at 30 times earnings with an earnings growth of more than 75%. Its operating margins are well over 10% and the fact that it has absolutely no debt makes me love the stock even more. Jobs and apple deserves to be trading at a premium of more than 40. Their innovation and image will drive the company to new heights.
To find out more information on AAPL visit the websites below, you will also be able to track the companies stock price and recent upgrades and downgrades:
Copyright © Eric Medina
Qualcom Deals: Present, Past, and Future
Qualcomm made the news twice in the last couple of weeks: 1) Cingular (AT&T Wireless) and Verizon have agreed to use Qualcomm’s MediaFlow technology to supply their mobile TV services. 2) Reports speculated it is close to resolving its patent conflict with Nokia, which has been operating under a joint licensing agreement but expires in April. Both Nokia and Qualcomm did not confirm the report.
Cingular will begin to offer its mobile TV service later this year and Verizon will rollout its service in the next three months. The result will be added revenue for Qualcomm. This is common knowledge, hence these deals have been priced into QCOM, but deals with the two largest wireless carriers in the states should supply revenue to drive a company for half a decade; the resulting price jump was only 4%. So where’s the uncertainty, why hasn’t the price made a full compensation for the announcements? Mobile TV needs higher speeds to operate due to the massive amounts of data the must be transmitted. Asia and Europe have wireless technologies implemented to a more advance degree than the states. In China and India the current rush is over 3.5G, in the US we are slowly getting to 3G. The lag in installing infrastructure to support wireless technology in the states has caused concern for delay in revenues and with delay comes the chance the newer, better, different companies’ technology might enter into the market. This is Wall Street, results happen now or tomorrow, not next week.
Here’s the upside, Qualcomm has a dominant position with the wireless carriers in the states, but wireless carriers only represent a portion of the future media flow. Broadcast companies, seeking a way to combat piracy, iTunes and all other new TV mediums are seeking a way to regain control over their content. Shows like House MD, Greys Anatomy, Survivor, the Office are popular and the networks need to adapt their supply routes to their consumers. MediaFlow can potentially fill the gap between today’s TV in kitchen and your mobile, not just for the wireless carriers, but also for the standard networks. Obviously the window becomes significantly easier to shoot through as VoiP phones become more prominent and wireless networks spring up in the major cities, thus bypassing the need for wireless carriers in the state-side metropolises. This is a play to consider as QCOM is currently 23% off it’s 52-week high of $53 in May.
February 12, 2007
Investing in the Pharmaceutical Underdogs
In the last twenty years, major pharmaceutical companies have spent millions of dollars in attempts to create new, revolutionary drugs. However, much to the avail of these large companies they have often failed and abandon projects when it appears that further research will not be cost effective.
When the major pharmaceutical giants such as Merck and Abbott give up, smaller companies try and solve mysteries of the abandoned drugs in attempts to making large profits. For example, GPC Biotech, a small German company, has just completed clinical trials for a prostate-cancer drug that that had previously been abandoned by Bristol –Myers Squibb Co. Furthermore, Dr. Huxley’s company, Speedel Holding AG, has just sold a drug called Aliskiren to Novartis that will help treat hypertension patients. When Dr. Huxley took her company public it was a very lucrative endeavor with shares currently trading at $136.
Companies that specialize in perfecting one or two abandoned drugs are sometimes successful due to the face that the entire business of these companies depends on the development of a small number of projects. Although producing one successful drug can make these companies rich, it is often hard to find venture capitalists that will invest in these risky endeavors. Many other hurdles also exist because of extensive FDA regulations and required clinical trials. So it is up to each individual investor to determine whether these types of companies are really worth the risk.
Posted by jcip at 08:48 PM
London Stock Exchange Fends Off Nasdaq Bid
Over the past few years, we have seen a fair amount of consolidation among the major financial exchanges. We saw the New York Stock Exchange purchasing Archipelago and Euronext and the Chicago Board of Trade agree to a merger with the Chicago Mercantile Exchange. With two of its largest competitors making these large strides to become larger and more diverse, Nasdaq, an exchange dealing primarily with technology companies, has been looking for a suitor to increase its size.
Nasdaq believes I has found this suitor in the London Stock Exchange. Over the past couple years, Nasdaq has been building a large equity stake in the LSE and has made a couple bids for the exchange. However, the other LSE share holders have been reluctant to accept any deal. This weekend, the LSE rejected yet another bit by Nasdaq, their third attempt, calling into question what the Nasdaq will do with their stake in the exchange.
UK rules prohibit Nasdaq from acquiring any more than their current stake of about 30%, which removes the option of them simply purchasing a 51% controlling stake. Many believe that the LSE may be in trouble for not taking this bid due to concerns regarding its fee structure and trading platform that have been complaints of brokerages that use the exchange and increasing competition from NYSE-Euronext. There are also questions about what Nasdaq will do with their 30% position in the LSE, should they choose to unload it, LSE shares would surely suffer losses. Where this story ends is anyone’s guess.
February 06, 2007
Healthcare & The FDA
Now that the Democrats are back in power healthcare reforms may soon affect the drug industry. Discussion surrounds reforming the FDA as to create tougher safety rules as well as reduce the cost of prescription drugs. It is also a possibility that a new wing of the FDA will be created which would create focus specifically on prescription drug regulation. This branch would have the jurisdiction to change labels on medicines, regulate advertising, and fine those that are not complying to prescribed regulations. Since Democrats are in power it is less likely that they would depose legislation that would bestow more authority to regulatory committees as they view this move as one that would please consumers. Some Republicans also support this democratic view because of past drug-safety problems such as the recall of Vioxx. Furthermore, 2007 calls for a contract renewal which stipulates how much the healthcare industry will contribute to fund regulatory FDA processes. Some argue that addressing other regulatory issues other than the contract for the amount of money that the healthcare industry will contribute to regulatory processes could delay the renewal of this contract and be rehabilitating to the current FDA regulatory body. The new legislation proposed would also create a path for a new FDA agency to approve generic biotech drugs. This could benefit generic drug producers as this body could help speed up the approval process and allow generic manufacture to enter the market sooner.
Companies to Keep an Eye On Include:
Posted by jcip at 09:29 PM