Asif Suria

Ten Reasons I'm Buying Activision Blizzard

Enterprise Value (EV) = Market Cap + Debt + Preferred Shares + Minority Interest - Cash

Since Activision does not have any debt, I only subtracted cash from the market cap.

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Ten Reasons I'm Buying Activision Blizzard

@GoMyLittleSheep I have been holding the stock for over a year, periodically adding to my position since the merger. Thank you for your insight into the options. This has been a healthy and useful discussion.

Ten Reasons I'm Buying Activision Blizzard

@TJ0829: I believe the spread between GAAP and non-GAAP numbers combined with the fact that it is not possible to do year-over-year growth comparisons may have something to do with it. We should see post merger year-over-year growth numbers when they report results for the fourth quarter.

@Lonely Value: Besides the fact that Vivendi is not quoted on the US exchanges, the company is also into capital intensive telecom businesses and owns Universal Music Group. I would much rather have the faster growing pure play that Activision represents over Videndi unless the valuation of Vivendi is compelling.

Ten Reasons I'm Buying Activision Blizzard

@mbkelly75 As you very well articulated, the financial strength of the stock is great. However when you look at the P/E and PEG to reach your conclusions, you are taking GAAP earnings into account and not recognizing that the company is deferring a large portion of its revenue (and COGS) for World of Warcraft in such a way as to recognize sales over the entire subscription period. Most of the SG&A is however recognized in current periods, creating a situation where earnings may appear weak in the current period but should begin to trend higher in the future.

While GAAP earnings for 2009 are expected at 26 cents a share, giving the company a very high 2009 P/E ratio of 45.58, looking at the non-GAAP expected earnings of 63 cents a share, Activision has a 2009 P/E ratio of 18.81.

This might explain why the stock is not trending higher as looking at current numbers without digging in deeper makes the stock look very expensive.

You can find additional information from the following presentation on their website,

files.shareholder.com/...

Ten Reasons I'm Buying Activision Blizzard

@Shaftsinker I am well aware of Blizzard's track record of not shipping products on time. A game that I personally looking forward to called Starcraft Ghost was scrapped altogether and I addressed this in my original article about Activision Blizzard last year. That said they were originally planning on launching SC2 in time for Christmas this year but decided to move it to first half 2010. I think the primary reason they are splitting the game into three parts is to try and ship it out without pushing the release date out by years. They are also making changes to Battle.net to accommodate WOW as well as the new Starcraft.

@Hey Apples: You make some good points. DJ Hero did not do as well as expected and the Guitar Hero series appears to be aging. However the recent Call of Duty game goes on to prove just how much interest is there in the Activision franchises. The three Starcraft games, Diablo 3, WOW: Cataclysm and another MMORPG (Starcraft or Call of Duty?) make for an interesting pipeline that could more than make up for declines in Guitar Hero or Call of Duty.

Taking the Pulse of the Economy

Thank you Nick. Feeling much better since early July. Can't say the same about the economy. However it was surprising to hear JP Morgan's forecast of strong 3 to 4% GDP growth this quarter and a cyclical bounce even without labor conditions improving.

I must be living in a different world from the JP Morgan's economists.

Towerstream's Niche Is an Investor's Profit

Thanks KJP712.

@use_the_fed: I agree with you that the market and economic conditions are disconnected. I am more cautious than bullish at this point.

Towerstream Trading Below Cash

No idea why the stock popped 40% yesterday. I did post a blog entry this morning about Towerstream based on my conversation with their CEO last week.

www.sinletter.com/blog...

Shop at Costco, Invest in Safeway

Interesting thought Mark. Thank you for sharing with us.

I noticed your 2006 paper about Wal-Mart rolling out its organic initiative. Who would have imagined a few years ago that Wal-Mart would one day become the nations largest purchaser of organic milk and cotton.

What are your thoughts on Dean Foods, another company on my radar as a potential investment?

Shop at Costco, Invest in Safeway

@psonava You are absolutely right about Costco making most of their money on the membership fees. I am quoting from memory here and so don't hold me to the number but I believe they get more than 60% of their profits from membership fees given how low their margins are on the products they sell.

Big Bear almost makes a good point about rebates. I have an executive membership and get back almost as much money in rebates as I spend on the membership fee.

At any rate, I don't have to specifically calculate the membership effect because it is included in operating margins and Safeway's operating margins are better than Costco's even without membership fees.

What REALLY Caused the Mortgage Crisis - And What to Do Now

Thanks for your response Mr. Shaefer and for recommending my article to everyone on this thread.

While I agree with you that keeping a roof over their head is the primary concern for most people, young renters have the option of moving back in with their parents or splitting an apartment with other renters instead of renting by themselves. This is something Avalon's management mentioned in their last conference call. I am long the apartment REITs and will most likely add to my positions but wanted to play devil's advocate to get your thoughts about them.

Regarding liquidity and the ability to cover debt coming due, this sector of REITs has been fortunate enough to be able to borrow from GSEs like Fannie and Freddie to not only lower their interest rates but to cover any debt that is coming due in 2009 or 2010. I have some additional information about debt maturity of these on my website, which was not reproduced in the SA article.

www.sinletter.com/spec...

What REALLY Caused the Mortgage Crisis - And What to Do Now

A nice summary of what occurred and I am with you about the apartment REITs and wrote an article about them (specifically AvalonBay) a few months ago,

seekingalpha.com/artic...

What are your thoughts about the effect of unemployment on these apartment REITs, especially the more leveraged ones like AIMCO and Equity Residential.

iPhone Stock App Review

@mtkoren, I noticed that as I was wrapping up my review of DailyFinance and it certainly makes the native app more user friendly. Wish they had done this sooner.

I still prefer the charts and real time quotes of DailyFinance.

Long Ideas Increase in TIM Report

Interesting concept. Since this appears to be a sentiment indicator, like the VIX, it probably will not have much predictive power other than reflection the current reality. Could end up as a lagging indicator based on the time required to collect and compile the data.

Towerstream Trading Below Cash

@MMS2728, thank you for adding to the discussion and providing additional insight into some of your earlier comments.

I cannot comment to the Puerto Rico trip as I was not aware of it until you mentioned it.

Without a doubt the size of the layoffs was large. However based on the size of the company and the revenues generated, it was clear to everyone that they had ramped up very quickly in terms of employees.

With the focus shifting to reaching break even instead of growth at any cost, this seems like a logical step. It will be interesting to see what management says about it during the next conference call.