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Don Dion
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Don Dion (donalddion@gmail.com) is the owner and Chief Investment Officer of DRD Investments, LLC, based in Naples, FL. and Williamstown, MA., a family office focused on managing a long/short hedge fund, real estate assets and various other financial assets for the Dion family. Don no longer... More
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  • General Electric And Boeing Will Fly In 2014

    Boeing Co. (BA) has released a warning to its customers that the GE-manufactured GEnx engines (GE) used in some of its 787 and 747-8 aircraft are at risk of icing problems when flying near thunderstorms. The maker of the Dreamliner aircraft informed 15 carriers of a potential problem with ice crystals forming on the GEnx engines and causing the engines to reduce or lose thrust at high altitudes. Since April, there have been six instances of aircraft using the GEnx engines losing thrust due to high-altitude icing. In each case, the loss of thrust was temporary and did not endanger the plane involved.

    The affected carriers include Lufthansa, Air India, United Airlines (UAL), and Cathay Pacific Airlines; Japan Airlines, the world's second-largest operator of Dreamliners, is thus far the only carrier to ground the affected aircraft, and will replace 787s on its Tokyo-Delhi routes and Tokyo-Singapore routes with 777s and 767s, respectively. Japan Airlines has released a statement to the effect that it has begun work with Boeing and GE to resolve the problem and put its 787s back into operation, while GE released a statement by email that it is in the process of making software modifications to fix the problem in early 2014.

    It should be noted that Dreamliners using other engines are unaffected, including the aircraft employed by the world's largest operator of Dreamliners, ANA Holdings, which use Rolls-Royce engines.

    The problems with GEnx engines have occurred when convective weather-thunderstorms-lifts high concentration of moisture into high altitudes where planes would typically be beyond the threat of icing. Conditions at these altitudes can cause water to form tiny ice crystals the size of grains of flour; these crystals bounce harmlessly off the main body of the aircraft, but can be partially melted by engine heat, allowing them to adhere to engine surfaces and eventually reduce thrust. The issue is compounded by the inability of on-board radar to detect the tiny particles as it would detect snow or hail, leaving pilots with no choice but to evade convective weather entirely.

    Boeing recommends that pilots leave a 50 nautical mile cushion between GEnx aircraft and convective weather. A Japan Airlines spokesman cited concerns about difficulties related to avoiding thunderstorms in its decision to ground its Dreamliners, stating, "There may be cases where we wouldn't be able to go all the way round the cloud formation and we'd have to turn back."

    Impact On Shareholders of GE and Boeing

    Though this problem of course isn't good news for GE or Boeing, the effects on the firms will probably be negligible.

    GE's Financial Upcoming IPO will occur long after this story has blown over, and its excellent management team has weathered far greater crises than this one. See our recent story-seekingalpha.com/article/1857231-general...-ge

    Boeing can hardly be accused of irresponsible behavior, given that the warnings about the aircraft originated from the firm itself and that most of the aircraft are continuing to operate. There has been no headline-grabbing disaster, and the issue seems likely to be resolved entirely through GE's software fix at the beginning of 2014.

    If anything, Boeing may see a temporary dip in its share prices, though even this is doubtful given the firm's recent successful launch of its next-generation 777X aircraft, which has already generated deals worth some $95 billion from European and Middle Eastern customers. GE will also be a beneficiary of that deal as the manufacturer of the engines for the new aircraft. See our recent article- seekingalpha.com/article/1840822-boeing-... our recent story-

    Conclusion

    Given the tremendous run up of the stock market this year and some negative headlines relating to Boeing's union issues and GE's engine challenges, these two companies could face short term headwinds to their stock prices during the balance of 2013.

    However, looking ahead to next year, we are very positive about these two stocks in 2014 for investors who have a least a medium term horizon.

    These two companies must be considered as core holdings in most value and growth oriented portfolios.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Tags: BA, UAL, GE, long-ideas
    Nov 25 9:19 AM | Link | Comment!
  • Upcoming Cowell E-Holdings IPO Benefits From Apple IPhone Growth

    Among the many surprises in the global economy lately is the announcement of an IPO for a Korean company called Cowell e Holdings. The move will make it one of the few occurrences of an IPO from a joint private business and private equity company. The Cowell IPO will be listed on the Hong Kong stock exchange, although Cowell was previously listed on Korea's Kosdaq stock market. It was de-listed in 2011.

    Cowell e-Holdings, LTD.
    Cowell e-Holdings is registered in the Cayman Islands, managing a number of its companies that deal in optic electronics and manufacturing. These companies provide cameras, photocopying equipment and optical disk storage equipment to a number of companies including Foxconn Technology, LG Electronics and Samsung.

    In 2011, the private equity firm Hahn & Company acquired a 33.48 percent stake in Cowell with rights to purchase up to 50 percent of the company. Hahn is one of the newest of Korea's equity funds, and its aggressive inroads into the manufacturing sector bodes well for growth in this part of the world. Although increasing labor costs and shipping costs are threatening to rein in some industries in Asia, smartphone sales are expected to not only continue, but expand as more people become reliant on this technology for both business and personal use.

    Cowell and the iPhone
    Cowell e Holdings includes a number of companies that make the camera devices that are built into both the Samsung and Apple (AAPL) phones. The company bolstered their position ahead of the IPO by securing contracts to provide cameras for both these smartphone providers. About 80 percent of Cowell's products go to Apple manufactured goods.

    The IPO
    The Cowell e-Holding IPO seeks to raise between $150 to 250 million. The company has not yet publicly named an advisor for the deal. Kwak Joung-hwan currently owns 50 percent of the company, with Hahn & Company owning the remainder. In 2011, Cowell posted $323 million in sales, providing $22 million in profit. Net profit this year is expected to increase to $51 million this year.

    Conclusion
    The Cowell IPO offers an interesting opportunity for investors who want to expand their holdings in the tech sector. The company's securing of contracts with both Apple and Samsung help to insulate it against any slowdown of production of Samsung products due to the two companies recent legal wrangling. The iPhone continues to be one of the hottest products on the market. Cowell's contribution to the Apple product will make this an exciting IPO.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Nov 21 8:44 AM | Link | Comment!
  • Apple And Samsung Fight Over Billions

    The two giants in the technology industry are at loggerheads yet again, with a trial that is expected to re-litigate the damages that Samsung was ordered to pay in August of 2012. In the original case, Apple (AAPL) accused the Korean company of using the look and feel of the Apple iPhone and iPad for its own products. When Samsung, countersued, it was clear that Apple was in for a protracted fight.

    The Patent Infringement Case
    The legal case began in 2011 and involved similarities between Samsung and Apple products that did not exist until the iPhone and iPad were released to the public. The case was argued before a 9-person jury in San Jose, California. Apple's attorneys were able to present enough evidence to show that Samsung actively used the Apple exterior design to appeal to customers. Two months later, Samsung filed a countersuit also alleging patent infringement. The jury agreed with Apple and awarded the company with $1.5 billion in damages. Samsung's countersuit got them nothing.

    Decreasing the Damage Amount
    Apple's argument was that they lost the customers they would have were it not for the similar design of the Samsung products. However, the story did not end with the jury's decision. Samsung continued to contest the amount of damages, and Judge Lucy Koh decided that this figure may not accurately reflect what Samsung owed Apple. She contends that the figure could not be reasonably calculated based on the documents that were available to the court. In fact, this figure may not be able to be calculated at all.

    Samsung's ability to deliver a similar design of the products at a lower cost would not necessarily translate to more Apple sales, which has had a considerably higher price point. She struck $450.5 million from the settlement amount. This leaves a remainder of about $600 million for Samsung to pay.

    Conclusion
    The few hundred million dollars that remains in question is not a crushing amount for either Samsung or Apple. The two companies have had a number of settlement discussions but have been unable to come to any sort of agreement. Licensing rates for patented technologies is part of the dispute, which has held up any further progress.

    For consumers, the legal wrangling will have little effect. Samsung has already re-designed covers to avoid similarities between the two companies products. For investors, further monitoring of the two titans is warranted. Apple filed yet another suit against Samsung in February of 2012. Appeals of both suits are expected to go on for some time.

    For investors, Apple should continue to be a core holding in the technology section of your portfolio.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Tags: AAPL, long-ideas
    Nov 12 5:01 PM | Link | Comment!
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