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Corey Mergenthaler
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  • Big Deal Creates Opportunity
    The recent purchase of T- Mobile made by AT&T essentially creates three major carriers in the domestic cell phone industry.  Well let's make that two major carriers, and Sprint.  Over the past three years Sprint (NYSE:S) has been the dog of the cell phone carrier industry, seeing net losses of $2.8 billion, $2.4 billion, and most recently $3.5 billion.  Part of the reason explaining this is the fact that for the past four years (2007-2010) Sprint has been seeing a net loss of postpaid subscribers.  Meaning that for the past four years sprint has been loosing more customers than it has been gaining.  Sprint has been standing still, if not moving backwards, while their competitors have been growing out of reach.

    However the recent AT&T/ T-Mobile merger may have given Sprint an unlikely opportunity.  For starters there used to be four major carriers, and customers had their choice between the high priced Verizon and AT&T or the low priced Sprint and T-Mobile.  However now following the recent acquisition of T-Mobile, it seems there will only be one low cost option, Sprint.  Sprint offers a plan with unlimited calling to anyone on any network, unlimited messaging and unlimited data usage for only $69.99 ($79.99 with a 4G device).  A similar plan with Verizon (unlimited calling, texting, and web) will cost you $120, and a similar plan with AT&T will cost you $115.  Obviously just by looking at the cost of the plans, it's easy to see that Sprint will most likely become the only value cell phone carrier in the U.S.  The only question now is, will customers look past the glamorous iPhone carriers and see the savings in Sprint?

    To go along with these low  priced plans, Sprint has also begun addressing some of the fundamental business issues associated with the company.  In FY '10 Sprint focused on improving their cash flow, and cash on hand at the end of the year had increased by 35%.  Sprint has also made great strides in improving their customer service.  In fact in 2010 J.D Power and Associates ranked sprint 2nd place in a Retail Satisfaction Survey, ahead of both Verizon and AT&T.  Looking at the three carriers in the U.S, Sprint has the best customer service, and the awards to prove it, the lowest cost service, and comparable Android and RIM handsets to AT&T and Verizon.  Looking at Sprint's business model, I feel that removing T-Mobile (Sprint's largest competitor for lowest priced plans) will only help customers flow from the high priced AT&T's and Verizon's to the best value play in Sprint.  This may not be out of reach, as I said before,  Sprint has been loosing more customers than they are gaining for the past four years,  However that number has decreased by 12% between '08 and '09, and decreased by a whopping 76% between '09 and '10.   

    In the coming year I expect Sprint to continue to close that gap, and gain some of the bargain shoppers from T-Mobile.  This along with Sprint's improving cash flow condition and service quality makes Sprint a strong candidate for improvement and growth in the coming year.

    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in S over the next 72 hours.
    Tags: S
    Mar 22 3:31 PM | Link | Comment!
  • Micron Tech, a Bull in Bear's Clothes
    We have seen a rough stretch of days for the tech sector recently.  The disaster in Japan has left many stocks short on supply and many investors wondering what material implications could be in store.  However rather than worrying about the negatives in front of us, maybe it's time to think of the positive effects of the supply crunch.

    One story that has been making headlines is the expected decline in Apple's iPad 2 supply.  Many of the suppliers for the ipad 2 were damaged during the earthquake and subsequent tsunami in Japan.  While this is very negative for some (Toshiba, mitsubishi, sony, etc.), it's a great opportunity for others.  Toshiba, who's expecting to see production losses, is responsible for supplying Apple with the memory chips for the iPad 2.  However these chips are part of the highly populated semiconductor industry, and are easily replaceable.  Therefore Apple can easily replace their memory chip supplier with another company, like Micron Tech (NASDAQ:MU), who has no involvement with Japan.

    Micron Tech is a manufacturer of DRAM and NAND memory chips, just the type used in the majority of smartphones and tablets.  However unlike most other semiconductor manufacturers, Micron Tech is located in the United States, and completely removed from the tragedies of Japan.  Micron Tech had a recent run up to $11.95 just last month, and with an expected increase in demand, I wouldn't be surprised if we see that price again.  Right now Micron trades at almost $10 a share which is roughly 15% off from the 52 week high of $11.95, and very attractive.  Recently Micron Tech has been pulled down by the overwhelmingly negative sentiment towards the tech sector.  However there is nothing fundamentally wrong with Micron Tech, it's just another victim of the recently bearish tech sector.  As the supply squeeze becomes more apparent look for stocks like Micron Tech (MU) to really benefit.

    Disclosure: I am long MU.
    Tags: MU
    Mar 20 12:38 AM | Link | Comment!
  • Will These Stocks Have You Travelling to Higher Profits?
    WIth the summer upon us, and the economy recovering, many Americans will be looking to travel in the near future.  With the declining economy over the past few years, many Americans chose a 5 hour drive to the beach over a 4 hour flight to Vegas.  However with the economy improving, it is expected that more vacationers will choose that flight to Vegas, or the Caymans, or even Europe this summer.  In fact a recent Orbitz survey of 3,000 travelers shows that 36% of those surveyed say they will spend more on leisure travel in 2011, while 42% say they will spend the same, and 90% said they had planned to take two or more leisure trips in 2011. 

    There are a few ways to play the increase in leisure travel.  I think by far the best way is to play the travel sites such as Expedia (NASDAQ:EXPE), Orbitz (NYSE:OWW) Travel Zoo (NASDAQ:TZOO) or the kingpin Priceline (NASDAQ:PCLN).  I personally am a fan of the recently beaten up Expedia inc. (EXPE).  The company owns the flagship website, but also, and  Expedia had previously traded between $25-$29 a share, until disappointing 4th quarter earnings dropped the stock to below $20.  I think the current price of $21.50 is still an easy buy.  Expedia will obviously benefit from the increased vacation travel, and also has an opportunity for global growth, with many of their sites launching localized international travel sites.  With travel on the rise, and growth potential, I think Expedia is certainly a stock to watch for in the coming months.

    Disclosure:  I am currently in a long position with Orbitz (OWW), and had recently held a position with Expedia inc. (EXPE).
    Tags: EXPE, PCLN, OWW, TZOO, Travel
    Mar 19 2:00 PM | Link | Comment!
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