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A.B. Mendez, CFA

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  • Facebook IPO: What To Look For In Facebook's S-1 [View article]
    Hearing increasing chatter that the S-1 will be coming tomorrow.
    http://bit.ly/yx34VG
    Jan 31 04:52 PM | Likes Like |Link to Comment
  • Facebook IPO: What To Look For In Facebook's S-1 [View article]
    Thanks everyone for your comments. I find that most people who hate Facebook as an investment or think the ads are still lower-value "remnant inventory" are not regular Facebook users. Most people who use the site regularly have seen a pretty consistent improvement in the quality of the ads over time, though I still get some irrelevant ads (eg: "dino claw ring..."). However, what many miss is the fact that large national/global brands are spending billions (collectively) to drive people to their Facebook pages, because what they accomplish there is a much deeper interaction than is possible in conventional display or search advertising. It's a two-way dialog, sponsored games, apps and the like that accomplish two key objectives of brand marketers: creating an emotional connection with the customer and gaining massive amounts of data and ultimately, actionable insights about their audience.
    Regarding Groupon, it is not "falling." It closed today above the $20 IPO price, as it has on 64% of all days since the IPO. Earnings next week (2/8) should provide some valuable insights into how their business is developing. The market cap is $13bn - more than 2x what Google offered them about a year ago.
    Jan 31 04:48 PM | Likes Like |Link to Comment
  • Why I Recommended Shorting VistaPrint Before the Close Wednesday [View article]
    Just a point of explanation, I was working as a paid consultant for comScore at the time I made this post. It was admittedly made for marketing purposes.
    Feb 17 12:38 PM | Likes Like |Link to Comment
  • What Should Youku Really Be Worth? [View article]
    Right, they set the price is how they got the price.
    Dec 10 11:29 AM | 2 Likes Like |Link to Comment
  • What Should Youku Really Be Worth? [View article]
    YOKU is trading at ~80x annualized revenue? This thing is going to CRATER in the next couple of weeks. I can't wait...

    DANG not much better. Best case 2012 EBITDA $10mn... if you take 50 TIMES that 2012 number, you get to 0.5bn... stock price now puts market cap over $1bn. Has to come back to earth at some point.
    Dec 10 10:31 AM | 1 Like Like |Link to Comment
  • Apple's Future Revenue Driver: FaceTime [View article]
    Thanks for the article and some comments; I now get that one main reason that Facetime is a big potential rev driver for AAPL is that it will help to accelerate the refresh cycle for many who already have Apple devices but will want the video chat capability.

    What I was hoping to see in the article/comments and didn't find was how Facetime could drive incremental revenue after the sale of the device. I guess it's a greater motivator to buy the devices if Facetime is free, but seems like an opportunity for a free ad-supported service or a paid service that offers cloud-based video (chat) archiving etc. Wondering if anyone else has comments on how Facetime could drive revenue after the initial sale.
    Nov 8 06:13 PM | Likes Like |Link to Comment
  • Are you still out there? More traders are taking off from 11:00 to 2:00, with market action increasingly concentrated in the first and last hour of trading. Maybe it limits potential gains - but think of all that golf and tennis time.  [View news story]
    Ha, it's 1:18 and I am just getting ready to head back to the office.
    Sep 10 01:18 PM | Likes Like |Link to Comment
  • Why Micron Technology Stands Out [View article]
    "Favorable supply/dynamics." Please expand a bit. I heard something on Bloomberg today to the effect that "14 (or 17 I don't remember) chip fabrication plants currently under construction..." somewhere in Asia, I believe; location less important. Is that the problem? How do you explain the following, and more significantly, the huge P/E spread between MU and SNDK. As you can see, I don't know the space/would like to get to know it a bit better.
    Quote, for July 2010:
    "Semiconductor manufacturer Micron Technology Inc. (MU) lost 13% to $7.39."
    Jul 30 01:46 PM | Likes Like |Link to Comment
  • Why I Recommended Shorting VistaPrint Before the Close Wednesday [View article]
    Take a look at the relative performance of all of VPRT, GSIC, and DRIV today. Thanks for reading.
    Jul 29 11:58 AM | Likes Like |Link to Comment
  • Netflix (NFLX): Q2 EPS of $0.80 beats by $0.09. Revenue of $520M (+27%) vs. $524M. Shares -9.4% AH. (PR)  [View news story]
    My guess is that churn up sequentially from 1.7mn to 2.0mn is the main reason for the stock tanking. In keeping with my thesis that LT, as cable companies work out deals with content owners, eventually virtually all movies will be available over the set-top box... who needs NFLX?
    Jul 21 06:02 PM | 2 Likes Like |Link to Comment
  • Why the BP Spill Is Bigger Than You Think [View article]
    I found the article interesting and thought provoking. The most obvious (apparently not to most of these commenters) and practical application of the article/table at the end of the article was that if the spill is already 14x the size of Valdes, and we assume it ends up being 20x the size of the Valdes when all is said and done, then the cleanup cost could end up being $3.8bn x 20, or $76bn. At last check, BP shares had been cut in half from $60 to $30 since the spill began, and market cap stood at (half the previous market cap) $93bn. Assume that reputational damage is at least $17bn (I won't ever go to a BP filling station again, for example), and the current market price looks about right.
    Of course nobody knows if we are 2/3 done with the spilling, 1/3 done... and I would suggest that a multiple of (Gulf coast economic destruction caused by BP spill / Alaskan coast economic destruction caused by Valdes) be applied to my calculation above to determine the cleanup cost/penalty, as my guess is this mess will cost a lot more money in lost wages for area workers.
    I also don't know if the $3.8bn I saw in a May/2010 NYT article for Exxon's cleanup cost included civil/punitive costs to Exxon. It appears there may be some kind of "global settlement" for BP, but personally I would be happy if the company were allowed to survive only to pay off in the form of a never-ending royalty stream the endless cost that their negligence has incurred on residents of the Gulf Coast, and as token compensation (we can't adequately be compensated, for any amount of money) for the countless unintended/as-yet-unre... consequences that we will all be living with for the rest of our lifetimes.
    Jun 22 07:51 PM | Likes Like |Link to Comment
  • Case, Shiller and Michael Lewis [View article]
    Theoretically, all of the valuation ratios are always at least somewhat relevant. As a corollary to that, none of them are some sort of "magic bullet" that can necessarily tell you whether a stock or the whole market are "Buys" or "Sells." It's when taken together, and considered in the context of all the other relevant information you can get about the business/market, and comparable investment opportunities (either current comp multiples of comps for the same asset in different historical periods), that individual numbers and ratios start to have greater meaning.
    If we can devise a method to look at current the current P/E, P/S, P/BV or any other ratio in a way that eliminates short term market fluctuations (like near-zero/negative earnings in the current period), then there's no reason why P/E is any less relevant now than in any other scenario. The point I made in the article was that I think the Shiller method as described by Blodgett - taking a 10-year average level of earnings for the S&P, to normalize for where we are in the cycle and make numbers more comparable to other times in the market's history - is as good as any I've seen. Since the prices are still above $0, it does provide a valid way to look at P/E in a way that's comparable to the worst past bear markets/recessions/dep... etc.
    In order to argue that using a 10-year average earning level is invalid, you'd more or less have to argue that our financial system is going to completely fall apart and that we'll never regain historical levels of production/profitabili... ...OR, you could argue that we're headed into an environment akin to the "Lost Decade" seen in Japan, that regardless of depth will be longer in duration than was the aftermath of the Great Depression, rendering a backward-looking 10-year earnings level unduly optimistic for a forward-looking valuation metric. I think that last argument can be made more convincingly than the first, but let's not write off the resiliency of the American economy just yet.
    As soon as the market gains some level of comfort/confidence that Obama isn't turning this into some form of quazi-communist/social... system, I think the process of capital formation will start to take a more normal course again, which will hopefully contribute to the eventual economic recovery.
    Mar 10 01:49 PM | Likes Like |Link to Comment
  • How to Deal with the Automakers' Crisis in Confidence [View article]
    I apologize to anyone who has "subscribed to comments" for overposting, but as I keep seeing more interesting comments, I'll respond to one more.

    What I suggest to pensioners is: compare the likely pension payout in a bankruptcy situation to something like 60% of what the current/historical pensions have been, and negotiate the 60% if 1) it's better than the bankruptcy scenario and 2) that gives the firm a better shot of making it through this economic cycle.

    I don't pretend to know F and GM's situations well enough to say which is better-positioned to lead going forward, I just note that Ford is not asking for government assistance, and that GM doesn't appear to have been served well by its management for some time.
    As an (industry) outsider looking in, I'd like to see a competent "car czar" appointed, and see that person broker a merger of F and GM, with the government making loans to keep the combined firm afloat, and drastic measures taken to make the combined firm more efficient/viable. I think some current asset sales should be used to reduce the need for government loans, and certain assets should be earmarked for sale to any/other/internationa... firms when the economy improves, in order to accelerate the repayment schedule.

    More specifically, I would compare Lincoln and Cadillac, and select one of those to be one of the lines that's "earmarked for sale in a better market." This is the kind of painful choice that I'm not qualified to make, but that can serve as an example of how parts of both companies might be kept alive during a downturn through which they otherwise might not.

    Lastly, I don't think the car czar should be a permanent position, I think it should be a temporary job that's done by someone who can value assets, and who's seen as being impartial. Hell, Buffett could do it. If this were to happen (it won't), there would have to be a government "transparency" site posting all relevant documentation and soliciting public comment at each critical juncture, along the lines of recovery.gov and financialstability.gov...
    Mar 6 02:56 AM | Likes Like |Link to Comment
  • How to Deal with the Automakers' Crisis in Confidence [View article]
    I didn't realize the strength of this platform (seeking alpha) until I came back and looked over the comments to this, my first post. I'm inspired by the quality of this discussion.
    To the opposing viewpoints (if I read you right) of, for example, Paul Killinger and Betsy, I'd just say:

    1) I fully agree that "bailouts" are, 99% of the time, not the answer. But as alluded to at the end of the post, GM's operating loss narrowed meaningfully from 2005 to 2006 (not to mention the question of how they were losing money in the 2006 economic environment). Combine that with the severity of this crisis (exogenous to the auto industry) and the concept that it is arguably a strategic industry, and I think you can make an argument for keeping one of the automakers alive until we get past this crisis.
    2) If you read the last paragraph of the post, I'm not taking a tone of undue skepticism toward the automakers. I'm just making the argument, which I'll stick to, that the industry cannot survive in the global marketplace whilst paying more than 50% of its labor expense to pensioners. If you look at the 2006 results for these companies (F and GM), and note that they were losing billions of dollars in a good economy, and then consider that we may not see that kind of economy for several years, that fact is self-evident. So I think we need to compare our country's automakers' business practices to those of global auto firms that have been consistently profitable.

    I'm as proud of our country as anyone, and I mean anyone. But I think that the way to move forward is to take a look at our business mechanisms that's as sober as only this kind of economic crisis can provide cause for, and MAKE HARD DECISIONS, MAKE REAL CHANGES that lead to an American auto industry that is not only viable, but that's poised to take a position of global leadership emerging from this economic cycle.
    To be honest, I believe we NEED an American auto industry, but I also think many of our auto workers will need to be retrained in the field of renewable energy. In the interim, those jobs will have to be created by a public/private partnership, which will have a lot to do with the stimulus package. Thank you all for reading and commenting.
    Mar 6 01:56 AM | Likes Like |Link to Comment
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