Since 1985, David Swensen has been the Chief Investment Officer at Yale University. He is in charge of managing and investing the University's endowment assets and investment funds, which total over $22 billion. Swensen has added more than $16 billion to Yale's coffers, generating an annual return of more than 17.2% on his investments over the last ten years.
Mr. Swensen also outperformed 99% of U.S.-based mutual funds. He is well-known for having created what is called as The Yale Model, a mechanism for Multi-Asset Class Investing. He purposely diversifies the portfolio across a wide range including typical stocks, bonds, real estate, timber, and private investments like venture capital and leverage plans.
Particularly revolutionary at the time was his recognition that liquidity is a bad thing to be avoided rather than a good thing to be sought out, since it comes at a heavy price in the shape of lower returns. The Yale Model is thus characterized by relatively heavy exposure to asset classes such as private equity compared to more traditional portfolios.
He is the author of Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment and Unconventional Success: A Fundamental Approach to Personal Investment. It consists broadly of separating a portfolio into five or six roughly equal parts and investing each in a different asset class. Central in the Yale Model is broad diversification and an equity orientation, avoiding asset classes with low expected returns such as fixed income and commodities.
This type of investing - allocating only a small amount of traditional U.S. equities and bonds and more to alternative investments- is followed by many larger endowments and foundations and is therefore also known as the "Endowment Model" (of investing).
I think it is interesting to analyze David Swensen holdings in order to generate "seed investment ideas" for further research. I like to analyze Institutional Portfolios in Whalewisdom.com, a website that lets me filter different portfolios and managers. I consider that if a stock is a top holding from a prominent portfolio manager such as Swensen, the company must have passed rigorous research standards, so my confidence level to invest soars higher.
Zipcar Inc. is charge of a car sharing network which provides self-service vehicles to members located in reserved parking spaces throughout the neighborhoods where they live and work. The firm's vehicles are accessible for use through its reservation system available by phone, internet or wireless mobile devices. Once the vehicle is booked the member opens the vehicle with his or her keyless entry card and drives away. Its primary solutions include: Individual Membership, Zipcar for Universities, Zipcar for Business and Zipcar for Government and FastFleet. Zipcar Inc. is headquartered in Cambridge, Massachusetts.
Important aspects to highlight about ZIP are that the firm reported Fourth quarter revenue that came with a 21% growth ($62.9 million) compared to $52.1 million in the same period of the year before; full year revenue was up 30% to $241.6 million from $186.1 million in 2010.Its total members grew 25% from the period of last year to more than 673,000 at quarter end. Furthermore, the metric of usage revenue per vehicle per day increased 7% to $63 from $59 compared to the prior year.
Fourth quarter Adjusted EBITDA of $5.9 million compared to $3.6 million last year; full year:
According to what Scott Griffith, Chairman and CEO, said the fourth quarter results capped off a record year of revenue and profitability gains. "We reported our second consecutive quarter of profitability and posted fast increase in our established markets while spreading our global network of cities, both onshore and offshore. In addition to our market leadership in North America, Zipcar stands today as one of the largest car sharing operators in Europe and we aim anxiously to build our presence in this tentative market."
In terms of Valuation Ratios, ZIP is trading at a Price/Book of 2.6 x, a Price/Sales of 1.7 x and a Price/Cash Flow of 12.1 x in comparison to its Industry Averages of 3.5x Book, 1.3 x Sales and 9.0 x Cash Flow. It is essential to analyze the current valuation of ZIP and check how is trading in relation to its peer group.
The stock has been punished since last year, something that creates an opportunity for value investors. Needham talked about this in their last ZIP report from Febraury 15. Needham believes the negative reaction to Zipcar's guidance creates a buying opportunity for investors. First, FY12 guidance was largely in line with expectations. Second, they believe Zipcar's EPS and adjusted EBITDA could prove conservative given strength in the company's established and other N. American markets, as well as its improving economies of scale. Third, Needham believes UK demand should accelerate as marketing and optimization efforts gain traction through FY12. In a previous report from January 4, Needham also reported bullish comments about ZIP. They think that Firm believes share price weakness is related to pre-IPO holders selling after lock-up expiration. Since its initiation on 10/26/2011, nine of the top ten institutional holders sold 2.4 mln shares.
I think ZIP could be an interesting pick that may see a nice rebound in the coming months.
TiVo Inc. founded in 1997 in Alviso, California is a leading provider of technology and services for advanced television solutions, including digital video recorders (DVRs) and non-DVR set-top boxes and connected televisions. TiVo supplies a subscription-based service that allows customers to record watch and control live television. According to the model, TiVo-enabled DVRs can support analog cable, digital cable, satellite, over-the-air broadcast television and streaming and downloaded broadband video content, including standard definition and high-definition television. The firm produces revenue under three heads: Services (64%), Technology (12%) and Hardware products (24%).
One of the key reasons to invest in TIVO is that the firm has Strategic alliances which boost prospects for future growth: Strategic alliances are allowing TiVo to leverage its position across a growing number of media technology platforms. Furthermore, TiVo holds a number of partnerships with major companies such as Comcast Corp., Charter Communications, Samsung Electronics, Blockbuster, Netflix, Amazon.com, Best Buy, Virgin Media, RCN, Cox Communication, Suddenlink, DIRECTV, Walt Disney, Google, Pandora, FrameChannel and recently Facebook. TiVo has just updated its popular iPhone and iPad apps to integrate with Facebook. I believe these partnerships will help TiVo in improving its brand visibility and increase the distribution of its services in fiscal 2012 and beyond.
TIVO Current Net Profit Margin is -38.48%, currently lower than its 2010 margin of -10.07% I do not like when Companies have lower profit margins than the past. That could be a reason to analyze why that happened.
In terms of income and revenue growth, TIVO has a 3 year average revenue growth of -6.96 and a 3 year net income average growth of zero. Its current revenue year over year growth is -7.91, lower than its 2010 revenue growth of -4.49%. I do not like when current revenue growth is less than the past year. It generally shows that business is decelerating for some reason.
In terms of Valuation Ratios, TIVO is trading at a Price/Book of 4.7 x, a Price/Sales of 6.6 x and a Price/Cash Flow of 7.3 x in comparison to its Industry Averages of 3.6x Book, 1.3 x Sales and 5.2 x Cash Flow. It is essential to analyze the current valuation of TIVO and check how is trading in relation to its peer group.
I think that TiVo keeps facing a number of legal hurdles, which is expected to lead its litigation expense, thereby hurting profits. Furthermore, TiVo continuous focused on developing new technologies, which is supposed to lead higher R&D, resulting in lower margins in the close term. However, I think that TiVo is expected to benefit from new partnerships and distribution deals and international growth as well, which will lead to incremental revenue over the long term. This is a very speculative play that should be suitable for long-term holders.
Qihoo 360 Technology (QIHU)
Qihoo 360 Technology Co Ltd. provides Internet and mobile security products. Its main Internet and mobile security products include 360 Safe Guard and 360 Anti-virus 360 Mobile Safe, 360 Safe Browser, 360 Personal Start-up Page, 360 Application Store and 360 Safebox. The firm also suppies advertising services by giving marketing opportunities on our websites and offers web games developed by third parties, provide Internet security services such as remote technical support to paying clients and supply other Internet value-added services. Qihoo 360 Technology Co Ltd. Has its central office in Santa Fe, New Mexico, USA.
QIHU's current net profit margin is 9.48%, currently higher than its 2010 margin of 6.58%. I like companies that increased profit margins in comparison to other years. It is essential to know the reason why that happened. The current return on equity for QIHU is 17.12% which is close to the +20% standard I look for in companies I invest in.
In terms of valuation ratios, QIHU is trading at a Price/Book of 7.9 x, a Price/Sales of 38.3 x and a Price/Cash Flow of 135.1 x in comparison to its Industry Averages of 4.4x Book, 6.5 x Sales and 17.4 x Cash Flow. It is essential to analyze the current valuation of QIHU and check how is trading in relation to its peer group.
Recently, QIHU gave relief to investors of a big overhang in the stock. The concern that had led to the steep sell-off in the stock in April had been that their auditor might not sign off on their annual report, so this morning's filing is sparking a relief rally in the stock.
From auditor Deloitte Touche Tohmatsu in the 20-F:
"We have audited the accompanying consolidated balance sheets of Qihoo 360 Technology Co. Ltd., and its subsidiaries, variable interest entities and variable interest entities' subsidiaries as of December 31, 2010 and 2011, and related consolidated statements of operations, changes in equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2011. These consolidated financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit... In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2010 and 2011, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America."
I think this will create a positive trend for the stock that combined with the solid earnings report from Febraury 22 could be very beneficial for investors.
In its last report, QIHU reported earnings of $0.20 per share, excluding non-recurring items, $0.08 better than the Capital IQ Consensus Estimate of $0.12; revenues rose 213.3% year/year to $62.03 mln vs the $56.53 mln consensus. Net margin was 24.1%, compared with 20.3% in the same period last year, and 23.0% in the prior quarter.
Net margin excluding share-based compensation (non-GAAP) was 38.9%, compared with 26.3% in the same period last year and 41.2% in the prior quarter. The substantial year-over-year improvements in non-GAAP net margin were driven by leverage from robust revenue growth, as well as foreign currency exchange gains.The most important thing is that the Company issued upside guidance for Q1, sees Q1 revs of $63-65 mln vs. $55.21 mln Capital IQ Consensus Estimate.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in QIHU over the next 72 hours.