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Dana Blankenhorn
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Dana Blankenhorn has been a business journalist since 1978, and a futurist all his life.He warned about the coming Houston oil collapse in 1979. He began making a living on the Internet in 1985. He launched the first e-commerce daily for CMP in 1994, warned of the... More
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  • Amazon Performance Matching Google?

    A lot of people at Seeking Alpha who are bearish on Amazon.Com (NASDAQ:AMZN) are, for some reason, bullish on Google (NASDAQ:GOOG).

    I own both stocks, and I'm bullish on both. Not necessarily over a week or a month, but over several years, I expect my return on both these companies to be strong. They have big leads in technology, they have strong managements and entrepreneurial CEOs, they drive out costs throughout the rest of the economy, and they dominate the cloud market.

    That's not the way most writers here at Seeking Alpha view them. We have Amazon's Moment of Truth May Have Arrived. We have Free Cash Flow Not What The Bulls Purport It To Be. We have Amazon Willing To Do Anything Except Profit.

    How about Google?

    A Blue Chip Gem for 2015. ModernGraham calls it undervalued. Even the bears see silver linings. What's Wrong With Google? Where Does Google Go From Here?

    Remember, neither of these stocks offers a dividend. You are depending on capital gains for profit in both.

    Both Google and Amazon are what I call technology mega-caps. Apple (NASDAQ:AAPL) is in this category. So is Microsoft (NASDAQ:MSFT). These stocks are widely held. It takes a lot to move them in any particular direction. Microsoft has just caught up from a decade of under-performance - kudos to Satya Nadella. But do you really expect it to keep that up?

    The fact is that since February 3 the performance of Google and in the market has been almost identical. Even the patterns are similar - down in April, up in June, down in October. And the result? Amazon.Com is down 17.28%. Google is down 14.86%.

    What about the future? I can make a case on either in either direction.

    I can find Google increasingly running into government interference. As searching and finding data defines so many things these days, governments want to control what's found, and Google - as the chief finder - makes a handy scapegoat. On the other hand I can see Amazon is getting into all sorts of businesses. It's getting into delivery, into devices, it's getting into new markets like India. It has a lot of room to grow. It's growing so fast, it is outrunning profitability, the way tech companies did decades ago.

    It may be that, over the next year, what Google does works better than what Amazon does. It may be the reverse. I suspect it will all even out in the end. It's a case of horses for courses. I like them both, especially when they're both on sale, as they are right now.

    Dec 16 4:43 PM | Link | Comment!
  • The Smart Guys At Blackstone? Not So Smart

    When investors are looking to ask, who the smart guys are on Wall Street, they usually turn first to the Blackstone Group (NYSE:BX).

    After all, over the last five years those who have invested in Blackstone shares have seen a gain of 147%. That's better than even the "sage of Omaha," Warren Buffett, whose Berkshire Hathaway (NYSE:BRK.A) is up 127% since December, 2009.

    So when Blackstone chairman Stephen Schwartzman says "this is a great time to buy" energy and energy stocks, a lot of investors will tend to listen. Maybe they will buy their own energy shares. Maybe they will just buy Blackstone.

    But investors, as opposed to traders, should know that you invest for the long run, not the short run. You invest steadily, and you take the bitter with the sweet. But too much bitter spoils the sweet. And taken over a longer period of time Blackstone has been very bitter.

    During the financial crisis, for instance, Blackstone was absolutely hammered. In early 2009 the shares were trading at under $5, against over $29 just two years earlier. Blackstone wasn't leading the market during the last decade, it was following it, and it was following the market right off the cliff, taking its own investors with it.

    Berkshire was hurt, too. At their low point in early 2009 you could get a share of BRK.A for about $76,800. The current price is $224.800.

    Blackstone, meanwhile, is just now reaching the levels it was at in 2007. It's still 3.5% below its starting figure, at $33.85.

    Where the big money "crowd" has been going over the last five years has been energy, and many have been leveraging their bets. Many have bought, not just shares in oil and gas companies, but the debt of such companies, attracted by high yields. Some have bought on margin. Each time oil prices have plunged, these big players have had to ratchet down their other holdings. That's why the Dow (DJIA) has fallen this month despite an improving outlook for the economy. The "smart" money has been forced to sell.

    The point is that there is a smart money "crowd" just as there are crowds in other areas. And the one place you don't want to be, as an investor, is with any crowd at all. You may profit while the crowd is profiting, but you'll be subject to their same groupthink, and suffer when the crowd suffers.

    When you hear Schwartzmann, or any TV talking head, brag about how they "got out" of something that was bad, or cite their own performance, you need to be wary. They may be talking about a loss they were forced to take. And their time frame is almost guaranteed to be self-serving.

    Schwartzmann, like a lot of the smart money crowd, is saying that you should buy energy now. But oil stocks are a falling knife. The stuff is in glut because people don't know where to put it. Even if everyone ran to the store and bought a high-priced, low mileage SUV, that car is still getting about 50% better mileage than the SUVs sold in 2007. This glut, like the natural gas glut before it, will take time to work out.

    When Schwartzman says he is looking for energy investors, then, he is implying Blackstone will be on the side of the table that is picking up distressed assets and holding them. But they could easily be looking for new suckers to take their own irons out of the fire.

    When it comes to energy shares, I'm going to wait for the panic to subside, and for the bankruptcies to start rolling in, before even considering buying just the strongest players. I want to see the "smart money crowd" wiped out before I'm going to invest in a boom-and-bust sector like oil again. The "smart money" was saying CDOs were safe in 2007, too.

    Tags: BX, long-ideas
    Dec 12 10:23 AM | Link | 2 Comments
  • Playing The Coming Solar Gold Rush

    So long as solar panels have to be "sold," through incentives, you want to be in stocks like SolarCity (NASDAQ:SCTY), Vivint Solar (NYSE:VSLR) and Sun Edison (NYSE:SUNE), which are in the business of selling panels to homes, or in First Solar (NASDAQ:FSLR), whose business model is based on selling panels to utilities.

    You want, in short, to be in the channel.

    But once the cost of installing solar falls below the cost of other grid energy, a point sometimes called solar grid parity, you will want to be on the other side of the trade. You will want be in a solar panel producer like Trina Solar (NYSE:TSL), SunPower (NASDAQ:SPWR) or Yingli Green (NYSE:YGE). And you want to be looking for IPOs from private companies like ITEK Energy in Washington.

    The analogy is to what happened in the computer business 40 years ago. Once PCs made it possible for everyone to buy a computer, sales channels changed rapidly. By the 1980s minicomputer makers with dedicated sales staffs, like Digital Equipment and Data General, were dead money walking. Thinner margins meant stores like ComputerLand had the business. But this turned out to be only temporary. They were replaced by super-stores such as Fry's and, eventually, consumer electronics retailers such as Best Buy (NYSE:BBY) as channel margins were continually crushed.

    The same thing is going to happen in solar. Solar parity will put a premium on margin compression. In 20 years your best solar bet may be a stock like Home Depot (NYSE:HD) or Lowe's (NYSE:LOW). But compression is an ongoing process. Smart investors will understand the pattern and move as the economics changes.

    Vishal Shah of Deutsche Bank, who has been bullish on the solar sector since joining the company in 2011, and made waves recently with a report on Vivint Solar which predicted solar parity by 2016. The company's investment bankers will be able to start reporting on the company next week as its quiet period expires. The company reports its third quarter earnings on November 11.

    Note, however, that Vivint is in the business of selling and installing panels, not in making them. It's like urging people to buy Digital Equipment stock in 1974.

    What's far more likely to start happening, as parity is reached, is that the low-cost module producers will expand rapidly and, while the resellers will do well for a time they will eventually fall back. Even if Shah is right a better place to be might be in a panel producer like SunPower, or even a beaten-down Chinese name like Yingli Green, whose domestic market is already exploding.

    The underlying lesson, however, is that solar investors will have to be nimble as parity is achieved. Don't bet that an ETF like the Guggenheim Solar ETF (NYSEARCA:TAN) or Market Vectors Solar ETF (NYSEARCA:KWT) is going to offer you maximum profit as we push through solar parity. And the figure you'll want to use to manage your new solar portfolio will be margins, both the margins of producers and those of everyone in the channel.

    So far this year, both the ETFs, and U.S. stocks that are tied to them, are hugging the flat line, up or down less than 10% in either direction. (TAN is up 3%.)

    But Yingli Green, down 44% so far this year, is continuing to grow, its results impacted negatively by the falling Chinese Yuan. Its customers are too large, too scaled, and too close to the Chinese government for the stock to go down much further, and there's tremendous upside. It's scaled operations that can sell at the lowest cost that are going to be in demand once solar parity is achieved, and fashions could quickly change in its direction.

    In other words, this is a stock picker's market. Look for margins, look for visibility, but don't be blind and try to buy the whole market. There are going to be losers here as well as winners.

    Nov 07 5:31 PM | Link | Comment!
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