I have been a big fan of Apple’s stock over the past few years but the time has come to sell the stock. Steve Jobs resigned today as the CEO of the company and is leaving the company in the hands of Tim Cook. Jobs will now move to the role of Chairman of the company and will no longer be involved in its operations. This is nothing personal against Tim Cook as he is a top notch executive but he is not Steve Jobs. [Read more...]
My Best Picks Over The Past Month
July 20, 2010 By 4 Comments
US Steel (X) has had a nice bounce since I recommended that investors pick up shares in the mid $30’s at the beginning of the month. Shares are up $7 giving investors an 18% gain.
Back on June 25th I recommended that investors get long Research In Motion (RIMM) when shares hit the $40’s. Shares appear to have bottomed out right at $47. The stock is up to $55 now. Investors should take profits now. I think that Research In Motion is headed lower.
On July 5th I suggested that investors get long Intel (INTC) at $19.48 and General Electric (GE) at $13.97. Shares of Intel have rallied 10.5% to over $21.50. GE has rallied 7.1%. I think that shares of GE have much more upside so I will continue to hold shares of General Electric.
My Current Picks
Bank of America (BAC) is a steal at $13 per share.
Exxon Mobil (XOM) is being given away at under $60.
Apple (AAPL) is worth buying at $245 a share. I would get long Apple shares.
Is Now The Time To Invest In Apple?
July 15, 2010 By 1 Comment
Everyone in the world knows about Apple Inc. (NASDAQ: AAPL). If it’s in the technology arena, Apple does it. Apple makes money selling computer hardware and software applications. Apple generates sales from everything including it popular lines of iPods, iMac’s, iPhones, and iPads. Apple even derives revenue from music, books, laptop accessories, laptop cases, laptop sleeves, headphones, speakers, cables, and docks.
Shares of Apple Inc. dropped to $250 today. Apple’s stock has been in a steady freefall over the past 3 weeks. Shares have fallen from the $270’s and the stock has trimmed over $15 billion dollars off of its market cap. Why the steep drop? Some spectators believe that the price drop is due to a glitch with the phone’s antennae. Apparently the phone has a tendency to drop calls if it is held at the wrong angle. Apple is holding a press conference tomorrow to address the “death grip” issues.
I think that the drop in Apple’s shares is not totally due to the glitch. Apple’s shares have followed a similar pattern after the introduction of the iPad, and previous generation iPhones. Investors bid the stock up ahead of the introduction of a new product and then dump the shares after the product launch. This strategy is creating a buying opportunity for smart investors.
While Apple may have to modify existing phones or give free bumper cases to iPhone users, the fundamental growth story at Apple still remains unchanged. Consumer demand is still extremely high for the iPhone 4G and the iPad. Apple is still on place to earn over $16 per share next year. Apple is currently trading at a significantly discounted multiple to the company’s historical P/E of 32.
If the rumors are true about Verizon getting the iPhone, that would open up a whole new market for Apple. Analysts estimate that Apple could easily sell an additional 12 to 15 million iPhones in the first year alone. The iPad is still in its infancy and has continued room for sales growth with Apple just launching the product this year. Imagine what sales will be like when the iPad becomes available on Verizon’s network.
Apple may be a $230 billion dollar company but the growth is alive and well. The P/E ratio at 15 is actually lower than the company’s projected growth rate of 16.5%. Apple deserves to trade at a premium valuation not a discounted one. Even if you attached the industry average P/E and multiply it by the average earnings estimate, Apple is worth at least $350 per share.
At $250 or below, Apple is definitely a buy.
Disclosure: I do not own shares of Apple.
Is Research In Motion A Value Stock or Value Trap?
June 25, 2010 By 4 Comments
It’s always important for value investors to be able to tell the difference between a value stock and a value trap. Value stocks are stocks that are trading below their true intrinsic value. These stocks are sometimes unfairly beaten down due to market events. Value traps are stocks that look like good investment opportunities and may appear to be cheap but really are not. Value traps deserve to trade at low prices. A value stock is a good company trading at a distressed price. A value trap is a distressed company trading at its proper price.
Value Stock or Value Trap?
Take Research in Motion for example. Research in Motion (RIMM) trades at $52 a share as shares plunged over 10% after releasing subpar earnings Thursday. Sales and subscribers slightly underperformed Wall Street expectations. Research in Motion continues to lose market share to the iPhone and Android phones. Analysts have been rushing to downgrade the stock hitting it with sell ratings. Research in Motion is a stock that is close to becoming a value play. If investors get an opportunity to buy shares in the 40’s, that would be a solid purchase.
Despite all of the negativity over Research in Motion, the company is still adding subscribers. The company is still growing just at a slower rate. 2011’s EPS is expected to come in at $5.90. Research in Motion is cash rich with $1.5 billion in cash and no long term debt. The company has even started buying back 3% of the outstanding shares. The key for RIMM is its new Blackberry phone. Will its new Blackberry phone be able to take market share from the Google’s and Apple’s of the way? Analysts believe that will all depend on how successful RIMM’s new apps and browser is.
My Take
I have to admit there is some risk in buying RIMM but the opportunity to buy a solid tech company trading at just 7.5 times earnings would be attractive to me in the mid 40’s.
Do you think that Research in Motion is a value stock or a value trap?
2010 The Year of The Tablet PC
January 7, 2010 By Leave a Comment
The race to be king in the tablet PC market is heating up. Hewlett Packard, Dell ,Lenovo, Sony and Samsung have all displayed their tablet PC offerings at the 2010 Consumer Electronics show. Microsoft is expected to release a courier tablet PC within the next few months. All of these companies are competing to be the first to market in the sizzling hot tablet PC market. The game changer however is expected to be Apple’s “iSlate” tablet PC expected to launch in the next few weeks.
The tablet PC market is important because it is seen as the next major growth market in computer hardware. Tablet PC’s are smaller more portable devices than netbooks. Netbooks are still relatively new devices ad are expected to surpass 14 billion in sales next year. The tablet market is expected to take in over 5 billion dollars in revenue in its first year. That’s impressive. Tablet sales could increase profits significantly for many tech firms. Now you can see why tech firms are scrambling to be the first to market with their tablets.
The reason that I think that Apple’s iSlate will fare the best is because of Apple’s recent history with its product offerings. From the ipod to the iphone to the imac, Apple has wowed consumers with its innovation in product development. Apple products always seem to possess unique features that differentiate their products from competitors. Consumers have ponied up the cash for Apple’s niche products even during the recession of the past few years. I don’t expect this year to be any different. Piper Jaffray analyst Gene Munster estimates that Apple could add over 1.2 billion dollars in revenue in year 1. That’s a 3% increase in revenue from tablet PC sales alone.
While the tablet market is large enough for many players to get a piece of the pie, expect Apple to outperform competitors as they have done in the past. I wouldn’t chase Apple’s stock at its current price of $210 per share but I would be a buyer on a pullback to $185.
Best Product Ideas of the Decade
December 24, 2009 By Leave a Comment
Who Knew?
One of the best paths to building wealth is entrepreneurship. It doesn’t matter if you are the CEO of a large company like Steve Jobs or a relative unknown like Todd Greene. Listed below are a just a sampling of profitable product ideas of the past decade.
Apple Ipod – The Ipod was launched by Apple at the end of 2001. Since its launch Apple has sold over 200 million Ipods and the stock has risen over 2000%. Steve Jobs entrepreneurial vision has reinvented the company and has made Apple relevant in the technological industry again.
The Snuggie – When I first saw the Snuggie I thought it was one of the stupidest inventions ever. Boy was I wrong! Over 20 million snuggies have been sold over the past 15 months. The product has been so successful that ASM is now selling designer snuggies.
Kernel Seasonings – Brian Taylor turned a popcorn seasoning business into over 5 million dollars in sales. Kernel Seasonings sells 14 types of seasonings to movie theaters and grocery store chains.
Headblade – Todd Greene proved that you don’t have to reinvent the wheel to be successful. Greene developed the headblade razor. He has sold over 1 million of his headblade razors which makes shaving your head easier.
Whatever Happened to Satellite Radio?
February 16, 2009 By Leave a Comment
I recently read an article stating that Sirius XM Radio is now on the verge of bankruptcy. This leaves me to ask the question, What ever happened to satellite radio? Satellite radio was supposed to become the next big medium. The days of FM and AM radio were supposed to be over when satellite radio arrived. The concept had great appeal. Commercial free radio, nationwide broadcasting and clear signals were touted as the main advantages of satellite radio. It has now been 9 years since satellite radio has been available to the public and Sirius or XM radio has never had a profitable year.
XM and Sirius merged in 2008 and are managed by Mel Karmazin. Karmazin overpaid for talent and hass saddled the combined companies with almost 3 billion in debt. The company has only survived this long by adding subscribers. The revenue earned from new subscribers is used to pay the interest payments on the company’s debt. With the massive decline in auto sales, Sirius has seen a decline in new subscribers and the company is now facing a cash crunch. Sirius XM has relied on the availability of credit to fund operations and with the credit crisis this has dried up.
Sirius XM(SIRI) stock is practically worthless under its current management team with a current value of 6 cents per share. Just a few years ago these were two separate companies rapidly gaining subscribers. Sirius was a $10 stock claiming that profitability was only a year away. XM was a $35 stock increasing in market share and appeared to be the winner of the satellite radio battle. Satellite radio may be a good idea but it has never been profitable due to massive debt loads, overspending and poor management. Combine that with streaming applications on cellphones, mp3 players, the Internet and you can see why satellite radio has fallen on hard times.
There must be some intrinsic value to satellite radio because media moguls John Malone of Liberty Media (LINTA) and Charles Ergen of EchoStar (DISH) are both bidding to take over Sirius XM. EchoStar holds 175 million dollars worth of Sirius debt that is due to be paid February 17th. Sirius XM currently has no way to repay this debt. Karmazin is threatening bankruptcy to try to maintain control of the company. He is acting selfishly to protect his own interests. Karmazin needs to stop fighting and sell the company to either EchoStar or Liberty. This would be in the best interest of the shareholders. Liberty Media or Echostar may be able to find a way to make Sirius XM work along with their DirecTV and Dish networks. Satellite radio would be a great offering to go along with satellite tv. DirecTV already offers XM programming with many of its packages. If Karmazin really wants to do what is best for the company then he will put his ego aside and step down.
Where has the growth gone?
January 22, 2009 By 4 Comments
Microsoft(MSFT) shares tumbled to $17.30 today after the tech giant reported weaker than expected earnings. Microsoft earned 47 cents per share vs. the 49 cents per share expected by Wall Street. Earned revenue came in at 16.6 billion which missed estimates of 17.1 billion. Microsoft failed to deliver up to analysts expectations. This begs the question, Where has the growth at Microsoft gone?
This week’s earnings announcements demonstrates the issues that Microsoft is facing. Microsoft’s PC software sales numbers were down sharply for the quarter. Microsoft blamed the lackluster sales on PC market weakness.This conflicts with what is happening at Apple. Apple(AAPL) crushed its earnings expectations and experienced 9% growth in iMac sales. While Windows is still the most popular operating system, the failure of Windows Vista has only helped to bolster Apple. Microsoft seems as if its becoming more like IBM with increasing sales from its business divisions and decreasing sales from PC divisions. Apple is rapidly becoming the new Microsoft.
Over the past decade Microsoft has seen its stock decline 54%. I have owned Microsoft stock for years and the stock trades like a savings bond. The stock has had very little capital appreciation and a low dividend yield. For years, I have waited while product after product is trumpeted as the next big earnings driver for Microsoft. From the Zune to Windows ME to Tablet PC’s, Microsoft has struggled to regain its technological edge. Meanwhile Apple has seen its stock increase 800% over the past decade. Apple has developed innovative products including the iphone, ipod and imac.
Microsoft may have to look to build upon its online search division and entertainment division for growth in the future. Microsoft’s search and advertising revenues were up slightly. If Microsoft does a deal with Yahoo, the combined companies would have a stronger presence in the online search market. Also, Microsoft’s entertainment division had positive sales growth the past quarter. Video games have appeared to be recession resistant so far. The next generation XBOX’s hardware and software sales could contribute significantly to the bottom line.
Microsoft is still a cash cow and could reinvent themselves with a major acquisition or a new product launch. Hopefully Windows 7 can be the catalyst to finally ignite earnings growth. Until the company identifies their next great software product,the stock will likely continue to flounder.
Activision & Apple
January 15, 2009 By Leave a Comment
Sold shares of Activision(ATVI) at $9.20 today for an 11.34% return. This stock was not as profitable as I had hoped. I cleared $1,100 from this trade.
Sold Apple(AAPL) at $83.85 per share. This was a quick trade. I only owned Apple for 15 hours. The stock returned almost 5% from my $79.75 purchase price.
Investment Moves
January 14, 2009 By Leave a Comment
Bought 200 more shares of Manitowoc at $6.85 per share. Total position is now over 800 shares.
Sold off Proshares UltraShort S&P500 (SDS) ETF at $80.50 and bought shares of Proshares Ultra S&P500(SSO) at $22.90.
Sold off US Bancorp at $21.60. I lost about 3% on that trade. I planned on holding it longer but I think all of the major banks will get hit by the poor financial condition of Citigroup and Bank of America.
Apple dropped over 10% today on news that Steve Jobs is taking a leave of absence until June due to health problems. I picked up some Apple shares at just below $80 in the after hours market.
