Charles Margolis

Bonds, long-term horizon, growth, value
Charles Margolis
Bonds, long-term horizon, growth, value
Contributor since: 2012
You're welcome & thank you.
Thanks for commenting, these bonds went up considerably since I wrote the article. The muni bonds due in 2033 were $87.53 with a 4.99% yield, now they are trading close to par: $100.
I see the current reports about layoffs: http://bit.ly/1pp83pk
I reviewed the info about EPIC when I wrote this, here is an article I just pulled up: http://bit.ly/1pp85O2
Health & medicine can be a tightrope for investors and for the businesses themselves (and to the point of your comment, to the people who work in the industry.) Both schools & hospitals (in many instances) routinely cutback workforce and simultaneously issue new job offerings. So there is a contradiction which exists in many businesses (and there are a very few businesses that standout for very low, to no layoffs.)
For any business that issues bonds, one of the most important things is **credit rating**. The lower the rating, the more it costs to borrow. Additionally, medicine in particular is complicated by the cost of doing business, and the insurance, possibly new taxes, etc.
Hope this sheds some light on the subject.
Here is TINY's profile:
http://yhoo.it/1jBy8hh
No it's not a closed end fund, that I know of. I think it is simply a venture capital company. It appears to be $93M market cap, but negative 0.65 EPS ... possibly TINY's investor relations page will provide the info you're looking for?
http://ir.hhvc.com
Haha, that's too funny re: "I'm just glad that there was so much less to learn back when I was in school."
There may be slightly more to learn now, however it can be learnt in half the time.
It's been a while since I traded in empties.
I do agree with you... there is one way around the commissions.
For instance Vanguard has a few ETFs, with rock bottom low expense ratios -- and they are commission free at Vanguard -- though of course I like individual stocks too, so I get your point. Thing is Vanguard has higher commissions unless you keep a minimum in their funds and it's like $50,000 (then you get a $7 commission, so your brokerage beats them by a nickel it seems) -- of course $50k is sort of a lot for smaller investors. I believe Fidelity has several commission free ETFs though they must have higher expense ratios on average compared to Vanguard (known for their very low expenses.) A couple I like to look at are (VYM) and (VCLT) though with the market where it is, I'm quite conservative currently.
I just make "recouping commissions" one of my top priorities, when I can.
Piso,
Thank you for commenting.
D-Wave was in the news last week, because IBM made a claim that D-Wave's computers are not actually quantum computers. This has been a much debated subject.
There are multiple types of quantum computers, in theory. D-Wave is working on a particular type. Some computer scientists who previously criticized D-Wave as IBM just have, ultimately changed their minds. Though it goes to a very technical realm.
I looked at the Time cover you pointed to, that's interesting, I look forward to reading it. Though I think it is fair to say the designers at D-Wave do have an idea of how their computer works.
(TINY) is not an ETF it is a very small venture capital firm with investments in many companies. D-Wave is not a publicly traded company. Theoretically if the company was bought out a venture capital firm with exposure could benefit -- however, in some scenarios it might not. Check out TINY's income statement: http://yhoo.it/1bqmof1 there appears to be regular losses, instead of net income. I'm simply not an expert on TINY.
I wrote this article based on my reaction to the NY Times Hardy article cited at the beginning -- from the perspective of a Lockheed Martin and Intel investor. I must say I find IBM's claims to be sort of 'dramatic.' D-Wave is working on a particular project, they are trying to develop a very particular type of quantum computer -- some of their research and results have seemingly indicated that they are not so far off -- I'd rather see IBM make a quantum computer, than spend time pointing fingers at D-Wave, criticizing them. I simply have no reason to believe that D-Wave has done anything other than make an intelligent and sincere attempt -- though please understand my perspective is as I stated, from that of an Intel & Lockheed investor -- not as an expert on quantum computers. Still, I find the subject extraordinary.
I called my brokerage, they don't take pizza -- they do take beer (empty or full cans) but it's only the 0.05 cent exchange rate, per can. So, I got a lot of drinking to do :)
re: "Of course it is better to pay the $6.95 commission and invest the funds rather than blowing the funds on beer and pizza."
You could always find a brokerage that accepts beer and pizza, in lieu of cash.
I agree with VYM -- I just picked some more up recently... isn't the expense ration 0.10% ?
Do you have any thoughts on the CCR5 Delta 32 mutation and potential for elite controllers' bone marrow transfusion to try to treat diseases?
kenser80,
Thank you for taking the time to reply -- I see what you are saying.
I do not invest like you, however I respect your way of investing. I should actually add that to an extent, I do invest like you, in that I have a particular interest in medicine. One of the most difficult areas of investment, in my opinion.
I wrote: "I would be less surprised to see the stock encounter weakness; however, this is directly tied to leadership, strategy, competition and the economy." And, it is worth repeating: "I've just been around long enough to know a stock can go up or down. However, my opinion is to give credit where credit is due. The way I see it, on average, investors don't give "free passes."
I believe Jeffry is a smart contributor, and appreciate his adding to the comments here. I believe he is a bear on Amazon and as such I believe he is critical of a few of Amazon's moves -- each investor is different -- though, I would add, I find it slightly ironic, I suppose, to be critical of Amazon on the groceries, and compare to Wal-Mart, which introduced groceries more extensively a few years ago.
Once again I am neither a bear or a bull. I like the company, and I do see reason to have exposure. I view Amazon as an important service, kenser80, by the way if you did not read my IBM article please do, so you can see a more full perspective.
http://seekingalpha.co...
I speak from a long-term, conservative stance. Also, I'd add, that the reason I do look to mutual funds particularly on a company like Amazon, is that I increase exposure through reinvested distributions. As I pointed out, Amazon went down 11%, the market went down 0.94%, and the mutual fund went down 0.96%.
So, I can have exposure to a company like Amazon, and it could go down 11% (in certain scenarios, obviously if every company in the mutual fund went down more, it would go down more, etc. etc.) However, in the long-term, I just get more shares if / when there is a distribution, PRGFX has a very small dividend -- though VTI has a higher yield, etc. etc.
Growth is important to Amazon, again I see points on both sides of the fence. Thus far, it does not change my opinion, to have some exposure to the company. It does not change my opinion to look to mutual funds for companies like Amazon. Stocks go up and down - you can win (or lose) either way. Though, I believe some exposure to Amazon does make sense -- not for one day, or one week: For decades. Hope you have a great weekend -- and good luck. I would, again, just say, it is my opinion that earnings can be very volatile; a company can go up on bad news and down on good news, I see you wrote a "smidge" in the stocktalk and then "at will" in the comment forum here (so I see you started conservatively, then added and added -- it is simply that, as I presume you know some companies can start out down then wind up, up. Obviously not the case for Amazon on Friday, however in context, the sell off was softer given the prior day's 4.9% gain, etc etc) -- As investors, we're just along for the ride, and the market is unpredictable.
kenser80,
Thank you for adding your thoughts. Amazon went down 11% on Friday after going up 4.9% on Thursday.
I'm somewhat surprised to see that you say "... shorting AMZN before earnings was a low risk move."
While your investment worked out, do you really view it as "low risk?"
I've said: "when I see a situation like this I think to exposure through a quality mutual fund." Additionally I've had commenters, who I have tried to reply to, say things like: "You provided a lot of factual material, yet failed to link it to your long position in AMZN. It's a pity, as probably your bullish case would deserve some merit based on amount of info you analyzed."
I suppose it must just be something about Amazon or companies like Amazon. I am objective on Amazon, however the hint of anything good to say about the company - or saying that both sides have valid points, brings some people to try to tear up that stance. Because in their opinion there is nothing good about the company they are bearish on. That is not directed at Jeffry or Paulo, who I believe state their cases intelligently.
I stated "I've just been around long enough to know a stock can go up or down. However, my opinion is to give credit where credit is due. The way I see it, on average, investors don't give "free passes."
I do not believe that investors gave Amazon a free pass -- if anything, the fact the company went down on Friday illustrates this. In terms of short-term trading, those who bought Amazon at the beginning of the day and sold mid-day could have made money -- those who bought on Thursday could have made money and long-term Amazon investors who have built up positions in the past few years have done well.
I appreciate your comment because you bring up a good point about market timing. Though I have seen numerous bearish article, about Amazon in the past couple years, where readers and investors stood to lose because Amazon has had a history of bucking the trend.
T Rowe Price Growth Stock went down 0.50 cents or just about 1% on Friday.
http://yhoo.it/1enYbVh
Anyways, good luck to you, and Jeffry thank you for adding your thoughts to this comment thread -- frankly I'm not sure why kenser80 decided to thank you here, instead of on your article. However he is welcome to do that. I would just emphasize, it is my opinion that placing large bets around earnings is not "low risk." Have a nice weekend, everyone.
Hey Amit,
re: "I would think the goal of investing is to..."
Many people would finish your sentence differently (if given the same topic.)
So allow me: "I would think the goal of investing is to: Create a balanced portfolio, which can (hopefully) sustain market volatility - based on an understanding of historical context and an understanding of both bullish and bearish sentiments on the company and the market, in both the near and long term."
I do not disagree with you -- though, some would say:
"I would think the goal of investing is: To arrive at objective conclusions."
"Why are 'bullish' and 'objective' distinct categories?":
In this comment thread I have compared the objective stance to the Owl (with two other birds representing moves towards either Bullish (Eagle) or Bearish (Hawk).)
So I am using the term "objective" to state a perspective in the absolute center, between the Bull and the Bear.
Good point Paulo. What I'm saying though, is catalogues are not as effective, I don't believe.
If you send out 10,000 catalogues, some % of them go to waste. Some yield one purchase, some yield several. Also the online platform is much more instantaneous -- this can be beneficial for inventory, and determining supply / demand.
Now Sears has an online marketplace, I just browsed it, though it does not appear to be as cohesive as Amazon -- I need to look at it more, to understand it fully though. Not to discount the model Sears created, it was certainly an important business in those days. I'm just saying $3.3B x 3 years (or so) revenue, and cumulative $500M loss does not compare to Amazon's ($34B + $48B + $61B) totaling $140B over three years, in revenue - with $1.7B net income over three years ($1.1B + $631M - $39M) through 2010, 2011 & 2012.
$1.7B net income is certainly minimal, though it appears one reason it is so low is spending on advancing the business into new areas. If the UPS overload during the holidays is an indicator, and 70,000 seasonal jobs, I'm guessing the holiday season was good. Earnings time can be volatile though as Netflix just proved. As you know -- it seems a company can have an excellent quarter and fall hard, conversely the financials can sound bad, and the company can jump.
The point? You really see a comparison between Sears catalogue and Amazon?
$3.3B annual (or $5.3B) adjusted for inflation, compared to $61B annual revenue.
Just saying, if that's the best you got, it's not convincing me. (You're making me feel like renting The Great Debaters now :) ) And yes, I respect the fact the Sears catalogue was the Amazon of the early 20th century.
I'm looking at the history of revenue growth over time and the decline in net income over time -- I'm looking at what Amazon has built, and it just seems impressive. The company has succeeded in the past, and I can not say for certain if they will continue to. Though, I do see some value. Of course it can go up, it can go down -- though Amazon has proven once, the market can fall hard, they kept on working harder (I believe) -- also, 70,000 seasonal jobs last October, offering 70,000 jobs for the holidays -- to support more business, I see 'that as good.'
Sears' catalogue business was doing $3.3B which would be about $5.3B today -- in 3 years the business lost upwards of $500M -- they fired 50,000 people.
Last October Amazon hired 70,000 seasonal workers http://cnnmon.ie/1eo40OX
Amazon did $61B in revenue in 2012 -- they lost $39M after two years of positive net income (though it went down.) Some of Amazon's expenditures are paying off. So while I understand your point "...a lot of business does not have value by itself." If Amazon did $61B in revenue and had $60B in debt, and no net income, and appeared to be drowning, this would be one thing. It appears Amazon is swimming though.
Every business operates differently, the good ones are not lying on their financial statements (while some businesses do.) I don't see Amazon being creative, I see Amazon reporting what they are able to report. I see them spending to achieve a stronger business -- so I'm just trying to see why it seems the Bears are dismissive of what Amazon is. I can not say Amazon will succeed or won't -- I simply do not know, however, I don't see reason to project failure based on the financials -- and net income is basically the first statistic I look to when I review a company. Over time though, I do see Amazon spending to the max -- as if maxing out credit cards -- now some do this, and they are destined to fail, they are just getting luxury items and know they can't afford them. I see Amazon, perhaps, maxing their credit cards (while maintaining a relatively small level of debt) and being very productive -- making moves to evolve their business.
This article explains the closing in 1993, it appears they were doing a lot of business - however, lost about $500M. Sears had $3.3B annual revenue and could not generate profits.
http://bit.ly/1dErDli
Amazon has grown from $34B annual revenue in 2010, to $61B in 2012. Net income over the same period went from $1.1B to a ($39M) loss, while Amazon has built up an array of advanced services. It seems the bears are trying to say Amazon is struggling -- well there are couple different types of struggling. Seems the sports / athletics analogy works on this.

One: Assigned to do 200 pull ups or run 20 miles or something. You just can not do the work, it's too hard, you're tired and you give up.
Two: There's the analogy to an athlete who is not going to give up, they look like they are struggling lifting some great amount of weight or on their 176th pull-up or what have you... see, it could be argued, Amazon is working harder and has no plans to give up. So if you just isolate a couple statistics, without taking into consideration context, and what the busines is actually doing, you might think they are the former. When it may be they are the latter.
Argentina is included in AmazonGlobal Export Countries:
http://amzn.to/1flQ222
Well, ok, Argentina limited "foreign online buys" to 2 a year:
http://abcn.ws/1flQ3mL
So, I guess Argentinians have to shop wisely.
Hey Atkins,
re: "... a compelling reason to buy the stock hand-over-fist."
As you see, that's not my perspective. Having exposure to growth and value equity mutual funds though -- is.
I do understand the point of trying to guess at what near-term moves is. Though, I am disheartened to hear about people leaning towards the gambling, and losing. I always think, gee they would have been better off holding something like Vanguard Wellington (VWELX), this fund holds stocks and bonds it was founded in 1929 -- which I will say is in my opinion a core holding (let me say though, I only recommend considering it, not buy / sell / hold, because every investor is in a different boat.)
For funds an investor deems proper to take chances with -- well sure, stocks go up and down, so there is opportunity. It is just, with Amazon, the formula that is so often used, has not worked. Amazon is valuable, in my opinion, though clearly the Bears have points.
Thus far Amazon has completely revolutionized the way Americans do business and they appear to continue to be hard at work. Thanks for your comment.
Yes the second article is interesting, good work on that.
I see your point more clearly. Except to say that I believe Amazon has several other revenue streams (and perhaps more on the way.)
I must say, though I know you take the one side, I find the dialogue interesting.
I must say though Paulo, I take the strongest of your points and I try to identify them, and see how they relate to the overall picture -- as I would if you were a staunch bull on the company -- given my perspective...
In my opinion if the Bear sees a company as going down and Bull sees the company going up, then I would say the animals in between, standing for objectivity would be, perhaps the Hawk, the Owl and the Eagle :) The Hawk leans to the Bear, the Owl is truly in the middle and the Eagle leans towards the Bull. Just sort of a fun analogy.
Hope you all have a great New Year by the way!
Psalerno, re: "In this way they are giving the illusion of growth."
My opinion is the quarterly revenue had a strong upward trend prior to the change Paulo described.
The underlying business does appear to have momentum -- I do not see any explanation for why the quarterly revenue growth prior to the change is an illusion.
Paulo, you say "1 unit" however you're talking about one side of Amazon's business being affected. Do you not see sales and revenue growth in the many other area Amazon operates in. It seems millions of people use Amazon to shop -- surely you don't think all of the business is an illusion. I understand, the P/E is one factor that suggests the company is overvalued. Though it does seem Amazon has a reason for lack of net income - the fact they are spending to further attempt to advance their business and grow.
I do find the dialogue intriguing. Though, it seems to an extent you are saying Amazon is pretending to be what it actually is. I do not see them pretending. I know, I know - though, that is the way I see the business currently.
re: "The revenue growth rate would have been smaller..."
Based on your article and your comments, I believe you're saying Amazon now takes 100% of the price of a book it sells as revenue. That seems to be fair.
There was a change, according to you. They implemented this change, and according to you revenue appeared to go up. However, what I'm saying is: There was growth prior to, and subsequent to the change, based on my reading of the chart. This next earnings should be interesting then.
Simply, I see no problem with Amazon using the price of a book it sells as revenue. Rather than just the price of commission, per your article.
Well hold on Paulo, you're not speaking to the fact I raised, though. If there was a change and revenue went up -- then how do you explain the growth prior to, and after the change took place?
I realize you are speaking to one, significant area of the business, however the company has multiple other services. However, again it seems the 'inflation' you are stating -- again I have to research it, since you've not presented the reference, other than your article which I was speaking to anyways. I asked for the reference you used in that article, and you replied with a link to your article.
Did this not occur over one or two quarters, was there not growth prior to, and afterwards?
Still the chart shows prior to the change revenue was going up. It appears, also, after the change, which I will have to research further, revenue continues to go up. Again if a change takes place, certainly there would be a spike, and subsequently, it appears there was still growth.
The way I see it, "all is fair" thus far. Revenue is just that, if they were not taking 100% of a book's value prior, and now they are, I believe it is fair. Some would argue the prior way, was not fair. Both sides have fair points. Yours, too, are fair.
Yes that is your article I was referencing. I was wondering you can provide reverences for the points you raised? I do not see those points in the two articles you linked to in the beginning of that article. This for instance:
"Book significantly higher revenue, for instance, for what were previously $300 million in ebook revenues Amazon.com will now book $1 billion in revenues"
Where is the reference for this?
Paulo you can you provide the excerpt or link -- I see the links in the article you wrote, however there are no references to these changes.
Paulo, additionally, if we saw one big jump and a plateau, that would be one thing, however revenue continues to go up. Changes happen, they may seem unfair, however they are always going to occur, for better or worse. I would expect to see one big jump and a flat line if what you are saying is true, is. However, the books are one important part of the business in addition to many other products and services.
I am looking at your article on the subject. So you do not believe it is fair for Amazon to use the full amount of the book it sells as revenue? You think they should just take the commission. I've got to say I looked at the Wired article you reference, I'm not seeing other references for the points you raised, I will look into this subject more. Though, my initial opinion is Amazon sells many products and reported revenue is accurate, and it's not all smoke and mirrors. If something changes as a result of a DOJ suit, and Amazon is following those rules, I think that is just a part of doing business. I realize, it appears you believe Amazon's revenues are in the fiction aisle -- I believe they have accountants who are doing what they are allowed to do. If they are allowed to state their business as they have, then it is fair for Amazon to do just that.
Why are you saying "flagging growth" the revenue growth shows a very strong trend.
Additionally, Amazon appears to be working on projects to further advance their business. It is possible for a company to be one of a kind, though I also see your point. I've pulled up Amazon, Coca Cola and Visa's quarterly revenue over the past 5 years, since 2011 Amazon has a stronger trend than Coca Cola, and Visa's is much lower.
It simply has to do with performance also (not to dismiss the criteria you're pointing to, as I've said I look to those very same statistics.) Simply can not say who is going to get the 10 - 10 - 10 score for an Olympic event, you know. They get it, after they perform. I don't mind Amazon spending and inventing, and going into the Kindle, etc. If they did not do these things, yet maintained a perfect P/E they possibly would not be as valuable as they are today.
Very interesting points you're bringing up by the way, I do understand your points. I have read your articles on Amazon for a while. Just saying: Here, is this one of the issues? You're saying 'flagging growth' but is it really... check the chart in this article -- If you looked at that, did not know whose it was... wouldn't you think: "that's good"..? The company is, in my opinion, not close to 'drowning in debt' at all. I don't see debt as a problem, currently (emphasis on currently.) I know revenue is just one component, oh yes I wish that was Amazon's net income chart, who wouldn't -- though there appears to be potential, that's all I'm saying.
Paulo I view companies in ranges. It is a fact, the stock could go up or it could go down.
Some try to say a stock will go one way or the other. Amazon has built an impressive service, I disagree that the business is flimsy. That's just my opinion. You are very right to think about bubbles. I understand you think Amazon could be worth just $5.6B.
Based on the current value of tech companies and their ability to easily reach a large base of customers, I simply believe Amazon has fulfilled potential, particularly if Prime membership is around 20 million people.
I believe Amazon has performed relative to the overall market and companies like Google, for instance. I did not believe the market was at the top mid last year. I know some believe this year could see a 20% correction, it just does not matter -- I still want exposure to quality companies. I know each year the market could go up or down. I also know what can happen when the market drops severely as it did in '08.
Right now, if it did, I believe Amazon would do exactly what it did 5 and a half years ago. Keep going, and keep attempting to develop its business. So I like that quality. Additionally if the bull market continues I see no reason not to have exposure to Amazon -- though I'm conservative.
re: "...is there no such level and your notion of its value is 'more'"
I've not said that, I've said the market and Amazon could go up or could go down. I do believe there is reason to have exposure to the company, particularly in a quality 4 or 5 star Morningstar rated mutual fund or something like (VTI) Vanguard has very low expense ratios (expense ratios being a key criteria I use when reviewing funds.)
I must say, I have not invested in Amazon based on its market cap previously. I have invested in a few companies based on market cap, however not the likes of Coca-Cola, Microsoft, Apple, Google, or Amazon. I do not rank Amazon among my very favorite companies, however a few years ago a friend asked for a list of a few companies, I believe I picked between 7 and 11, and Amazon was on it (I do not know whether the friend invested in any of the companies I listed, btw.) I don't know if I would include it today, however I believe a comprehensive long-term portfolio should consider (emphasis on consider) Amazon. I should add, also, I like Wal-Mart -- I wish I could find things there made in the USA, though I like the fact they used to provide well priced consumer products. I say 'used to' because the prices have gone up, and that's a shame, because they may do less business. I still do like Wal-Mart, though, for accessibility, and yes for a few of the deals, and I throw in gas stations and grocery business.
So, sorry, I know it does not answer your question. If Amazon happened to be a company I bought based on market cap, I might be able to tell you. I think of market cap in ranges and relative to the economy, and competitors. So it would be relative to companies like WMT and GOOG.
re: "at what point does you qualitative faith say "this is expensive enough"? "
Well look at Snapchat Paulo. It is sort of funny, though if you do not realize how important it is, you must look, and understand the refusal of reported $3B.
By your Sept. 27 2013 article, I did the math and it appears you were saying Amazon had downside to $5.6B market cap.
In a world where Snapchat is worth $3B... Amazon is not worth $5.6B. Conversely, I realize $1.6B sounds like a lot -- though, instantly when I reviewed the purchase of YouTube, I knew Google got an awesome deal, this speaks so much to who the leaders are. To a degree, they understand their businesses comprehensively (though, notice I'm not saying 'better than anyone.')
Now, I shall take a wild guess here Paulo. If you had founded Snapchat -- some guy, let's just say his name is Mark Zuckerberg, visited you, said "hey, give ya $3B for that."
I don't want to speak for you, or anything, buy my guess is you might say something like: "Sure. I will take your $3B and you may have my business. Thank you."
Ok, if you wouldn't, I believe many people would. The actual Snapchat founders, on the other hand, said "no." I realize it's complicated, and there is venture capital behind it, etc.
$3B is both a fortune and a pittance, depending on how you look at it. As well, $100B, is both a massive fortune, or a very small fraction of the annual budget. No, this does not mean investors should view companies liberally. I realize to a 'bear,' saying something they think is only worth $5.6B is neither definitively under- or over-valued at $180B is simply wrong. But I'm saying: "You really think Amazon is worth about 50% more than Facebook offered for Snapchat?"
Oh, I thought $3B was a lot, by the way. I had not heard of Snapchat. Now that I have heard of it, well let me, I'm not offerin' $3B for it anytime soon :) I have heard of Amazon, and I simply see the potential. So there's the long way of saying: Your question is interesting, and good, and I believe Amazon is one of a very few companies moving, basically at light speed in terms of technology investments (this does not mean, that I don't think it could go down.) So I can say: "I do not believe it is definitively (emphasis on definitively) under- or over-valued." Because it has to do with the market and the major investors, and the improvement and expansion of services.
Just yesterday Wal-Mart announced a price match with Amazon, I believe. That's great, my opinion is Wal-Mart was getting to be expensive. Reports went out a year and a half ago, about smaller, more boutique-like Wal-Marts. I just saw the amount of goods in my shopping cart, which used to cost about $30 were now about $50. Customers go to the deals, like bears go to honey.
re: "My guess is Acquisition was more defensive than anything."
I'm not sure if that's right Jeffry -- just how I read the acquisition, though I have to say I did not know the sequence of events, relative to Quidsi as you've added. I have to wonder if Amazon did not see the benefit of applying the technology to more of their operations, though this is just my guess on it.