Akamai (AKAM), the web content delivery and application gorilla, will report Q3 2009 on 28-Oct-09 AMC. Consensus forecasts is for $0.35 eps on $199.8M revenue. AKAM has excellent cash flow, a strong balance sheet and reasonable potential for growth for years to come. While competition continues to increase in the CDN space, Akamai continues to differentiate itself with higher value added services. Forward earnings forecasts in the internet information provider industry offer no reliability, but the overall growth in data and applications being served should provide enough market for several winners. Akamai remains the company to catch.

Q2 2009 Conference Call Transcript

Edited snips: Financial highlights for the second quarter include revenue of $204.6 million, an increase of 5% over the same period last year.
Normalized net income of $75.3 million or $0.40 per diluted share, down $0.01 or 2% from Q2 of last year, and we had very strong cash generation with a record $105 million of cash flow from operations in Q2. This increased our balance of cash equivalents to $927 million even after $17 million was used for share repurchase during the quarter.

value-added services increased strongly, especially late in Q2. We signed almost 200 brand new accounts to Akamai in the quarter, the highest number since the early days of the company, with a significant portion of these for our value-added services.

Motley Fool's Matt Koppenheffer hit the investing mainstream last week with his article on looking at value not price appreciation. It's an easy yet worthwhile read, I've reprinted some highlights from the article below. Matt's main thrust was "our concern shouldn't be over how much the market has gone up or down, but rather whether its valuation is attractive or unattractive".

Wise words, but I still can't get the wiggles out of my head.

Kongzhong Corp. (KONG) keeps on climbing. I finds these valuation heights somewhat dizzying, but I'm sure enjoying the ride. Like exciting fair ground rides, the trick is get off before you're sick.

I thought KONG had climbed high when it was at $8; at $10 I almost headed for the emergency exit. Yesterday KONG closed at $12.04. For the record that's a 100% gain in three months, a triple in four months and a five bagger off the October 2008 lows.

I wrote about my approach to tech investing and my issues with long-term buy and hold (LTBH) investing a year ago. 'Issues' may be a tad mild as I wrote

I view the classic investing style of long-term buy to hold or worse, long-term buy and hold (LTBH), as one of the most dangerous philosophies newbie investors can be exposed to.

Yesterday I looked at S&P 500 daily data from 1950 on. Today, thanks to the generous Professor Shiller, I'm going to look at historical market data from 1871 to the present for the S&P 500.

Let's jump straight in. The first chart shows one year percentage returns by month for the S&P 500 from 1872 to 2009 (Click to enlarge). I had originally intended on showing only the second chart, but included this chart showing the percentage change as it provides more information. I prefer the simplicity of the second chart which shows the up and down months year on year, YoY, for the S&P 500. I have taken the liberty of forecasting this out to the end of 2009, with a conservative "no up months". All will be unveiled in the coming months, but the first month when there is a probability of the S&P 500 being up year or year is October. The probability of an up month increases every month thereafter.

We may be seeing green shoots or maybe they are yellow weeds as Roubini suggests. To me that's all noise and I wonder why so much of the blogosphere and media is full of speculation on such matters. As even the best economists have a poor predictive track record, why should an average punter like me even bother thinking about it? There are easier and more profitable things to think about, but each their own.

Perhaps some people will ask why bother looking at historical market data. My simple answer is big picture reassurance. The main reason is that I do not want to get bogged down in the here and now of unemployment reports and the like, such stats are psychologically damaging and cloud the mind. They induce fear and you don't want to go there.

Crocs (CROX) is one of the favourite whipping boys on internet discussion boards. I remain grateful that someone prompted me to dig deeper into Crocs' deteriorating margins before diving in. That was about a year ago, when the stock had dropped from over $75 to $10. CROX went on to a low of $0.79 and closed Tuesday at $3.28. Check out this chart to see the wild roller-coater that is the CROX share price.

I think CROX just may be a turnaround candidate and is worth keeping an eye on.
The downward sales trend appears to be flattening out and they are attempting to right size their business.

Facet Biotech Corporation (NASDAQ:FACT) have filed a transcript of their Q1 conference call.

I posted a couple comments on my last Facet Biotech post to highlight Facet's Q1 10Q and conference call transcript. After reading the transcript I've decided to dig a little deeper. Most of the time when I'm investing it feels like me against the amorphous market and I'm OK with that, as on average I win that game. Investing in Facet feels different. It feels like I'm up against Seth Klarman and Robert Chapman, even though they are currently both on my side, or so I assume from their holdings. I feel totally outclassed and so all I can do is dig deeper, as I know at some point we'll be on opposite sides.

The Drinks are on the Shareholders and they’re flowing freely

Smith Micro Software Inc. (SMSI) reported Q1 2009 Earnings on Wednesday. Like most companies they concentrated their spin on the positives. The spin continued in their conference call with Bill Smith once again showing his mercurial salesmanship.

Ten months ago I recommended Safety Insurance Group (SAFT). Its share price is down since then, but far from out. While I prefer absolute returns my sense of well being dictates I must look at 2008 through a relative lens. Relatively SAFT was a great performer, beating the pants off the S&P500 by 22%; SAFT is down 20% over the last ten months while the S&P500 has fallen 42%.

In a tough 2008, Safety managed to increase book value by 5.6% to $37.17. With the current share price of $30.84 representing a discount to book value of 21%, P/B is 0.83. As the graph below shows, SAFT has increased book value every quarter.

In my last article on Leucadia (LUK) I said “Cautious investors may prefer to wait until after the anticipated earnings announcement between 27-Feb and 6-March as any major disappointment would result in a short term sell-off.” If only I took my own advice I would have saved myself some pain! Fortunately, I was paid well for my puts and was cautious enough to only put (excuse my pun) myself on the hook for a third of a position. Still, the pain, the pain.

Leucadia announced its 2008 results after market closed on Friday and the market took the stock to the woodshed on Monday, down 19% or $2.76 to $11.87 on a horrendous day in the markets. The annual report is not yet available on the company’s website, but can be found here at the SEC.
Following are some key points:

While Warren Buffett’s adoring fans continue to proclaim their glee at their “amazing opportunity” to buy Berkshire Hathaway (BRK.B), at ever lower prices I decided to look around too see if BRK is relatively good value. The answer I found is NO. Berkshire is still overvalued from a relative perspective despite a 47% fall over the last year.

I believe I have found a company with the qualities of BRK, but which is also relatively and absolutely undervalued, has younger men at the helm who are signed up until 2015 and has greater exposure to the inevitable return of global growth. Plus the stock has outperformed BRK over the last twenty years.

I originally disagreed with this Seeking Alpha article which claimed Facet Biotech Inc (FACT) was a current Seth Klarman favorite. However, upon more research it appears Klarman, the founder of Baupost Group, does indeed see value in this biotech spin-off from PDL BioPharma Inc (PDLI). In my defense it was difficult to give credibility to a writer who said Klarman wrote Benjamin Graham’s fundamental investing classic Security Analysis. Plus, first appearances made it easy to conclude that Baupost Group simply inherited the Facet shares when it was spun-off from their major holding of PDLI.

According to Baupost Group’s year end filing, it held 2,772,092 shares or 11.6% of Facet. It received those shares when FACT was spun-off from PDL, in which Baupost owns 14,363,749 shares, up slightly from the 13,860,460 shares it owned at the end of Q3 2008 and on the December 3 record date when one share of Facet was granted for every 5 PDLI shares.

Is Suntech (STP) the financier de rigueur for the solar industry?

It sure seems that way.

A recent article on Seeking Alpha theorized that Safety Insurance Group (SAFT) would benefit from higher gas prices and global warming. I’m unsure whether that thesis will be proved correct, but I am certain the author is clearly a very lateral thinker. I too like to have a thesis when investing, but require hard numbers to validate it. I thought I’d see if there is any safety in Safety’s numbers.

The first important maxim I learnt about investing in insurance companies was, buy at one sell at two. Buy insurance companies at a price to book value (P/B) of one and sell at P/B of two. It sounds too simplistic to be of use, but often the best ideas are incredibly simple.