Gary Bourgeault

Long only, research analyst, portfolio strategy, media
Gary Bourgeault
Long only, research analyst, portfolio strategy, media
Contributor since: 2013
The numerous acquisitions are a reflection of Facebook going public when it had matured in the North American market. While it will continue to grow, it won't be as meaningful because of the lower amount of disposable income of the average user, which won't be appealing to advertisers.
With that in mind, I believe we'll continue to see Facebook grow primarily through acquisitions, which of course means a lot of spending. Eventually that will catch up with them, but it will probably take some time before it becomes a major concern, although a weak economy could result in advertisers cutting back on spending, which would change the picture dramatically for Facebook.
As for the minimum wage, most people don't know or understand, how in the case of a company like Wal-Mart, it will be a competitive advantage. It will also result in low-skill people not being able to compete for jobs when they lose their biggest tool: I'll work for less to prove myself.
Back to the cost of content issue. I follow the entertainment industry closely, and Netflix is not at this time in the driver's seat, as it needs premium, original content far more than the content producers need Netflix. That may change in the years ahead, but for now Netflix will continue to have to pay top dollar for content. There is no doubt this will eventually weigh on the company's performance.
I do think it would be surprising if Apple did offer a major dividend increase for the reasons stated.
While I understand the reasoning behind SRI and FBF, I think the best way to respond financially is by giving to non-profits that focus on specific categories. It's my belief we should invest for no other reason than growing capital.
There are too many alternatives to have to allocate scarce resources to these types of funds, even though there are some that I would support as part of my world view.
As to the change in demographic, it has yet to be proven that older participants will in fact be more lucrative to advertisers. Some of mainstream media have been attempting to convince marketers of this for years - to no avail. That's why the key demo remains 18-49.
Another point is digital advertising is gravitating towards video ads. That's the area marketers are willing to pay the most per ad for. AOL is now the leader in actual ad views in that category. If Facebook can garner more of that market as it grows, it'll have a nice revenue stream for years. Of course that assumes it is able to not only maintain its user base, but grow it out. Since most of that growth is likely to be international, that may be a challenge as to what advertisers are willing to pay per ad, depending on the specific market.
Being probably the most negative asset class at this time, I also think there are a lot of precious metals companies undervalued. One of my favorites is TRQ (I own shares in it), because it's one of the largest mines in the world, and it probably has the most negative sentiment of significant miners against it at this time. I like the entry point the share price represents at this time.
Historically, in many cases bull markets ran longer than expected, and a lot of money was taken off the table before the started to slow down.
That doesn't mean that will happen now, but as always, it's impossible to accurately predict the future, whether it's a bullish or bearish one.
If I were a younger person I wouldn't be as concerned about this. If older, presumably you're already in safe stocks as it is.
There still has to be a catalyst.
I think Twitter will have a difficult challenge because it will have a more difficult time monetizing streaming video ads, which is where the digital ad market is going, as far as the best-paying ads go. Facebook is now offering them, and that bodes well for the company if it does it right. Google is facing the same challenge with YouTube, as it works on building out new premium video channels to attract the streaming video ads.
This is why AOL beats out all companies in regard to streaming video ads, because it offers the best premium content to place the ads against.
The key to digital revenue in the years ahead appears to be digital video, as marketers have stated they're willing to pay for streaming video ads. In that regard Facebook is weak. It has rocketed to second place in overall video views in December, but that's largely because of the 6-second Vine videos put up by teens and young adults to share with friends.
There doesn't appear to be much in the way of monetization there, as the market is looking for premium video to place ads against. Facebook needs to answer that demand in order to get a larger share of this lucrative market. I think that's going to be the major deciding point on the future success of Facebook, assuming it remains a viable social network.
The only reason to invest is to make money. Screw the SRI garbage. There are plenty of other ways to make a difference than to invest in inferior companies and/or products.
In three of the major characteristics of a company that ensure long-term growth, NetFlix is challenged in all of them.
Probably the most important is durable competitive advantage. There is little, if anything, that helps a video streaming company to stand out. NetFlix will increasingly have that problem as streaming becomes commoditized.
Lower costs are also changing, as NetFlix must expand its unique content in order to differentiate.
Finally, scalability is a major contributor to growth, and while it's relatively inexpensive, it's inexpensive for everyone for general content.
I don't see users of NetFlix falling over themselves to remain with the company when larger competitors start to compete and grow market share based on price. At the same time they're likely to have their own content offerings as well, neutralizing the temporary advantage NetFlix has.
The bottom line is there is nothing to suggest NetFlix has a moat that can ward off the growing number of competitors in the market. It will remain #1 for now, but market share is sure to diminish over time. That will eventually weaken the share price of the company.
It will be incredulous if Apple refuses to compete in China. It is by far the market it must penetrate to grow, and it appears it will refuse to make the necessary adaptations to grow there. The ghost of Steve Jobs continues to haunt the tech giant.
There is little or no credibility concerning Hilsenrath or anyone else announcing the winding down of the Fed's bond buying program. It's far too early, and the stated goals concerning U.S. unemployment aren't close to being met.
Saying the Fed is mapping out an exit is pretty much meaningless. Of course it's looking at how to unwind it's position. That has nothing to do with the timing of the exit.
Fed liquidity will continue on for some time, and investors can count on it. This is like the leaked comments in the minutes of FOMC meetings.
Whether or not that will reproduce past performance is another question
Another possibility at this current time is to wait a little while to see if the blue chips are going to continue to go down, as many have since the middle of April. If so, a better entry point could be achieved, providing a good starting place for investors. Either way, these good stocks will continue to do well over time.
The nuclear sector and uranium is definitely going to climb. There is also the factor of Japan bringing its reactors back online, although the risk there is how quickly that will happen.
There is also the many nuclear reactors being built in China, and even America has recently approved a new reactor to be built, with others in the pipeline.
It appears a plunge in equities, at least a number of blue chip equities with good dividends, started in the middle of April. If those companies continue on down, it's likely they'll pull the market down with them.
We can't trust or rely upon mainstream media outlets to report, or maybe even understand, the economic numbers (assuming they even dig a little beneath the surface). Only hard data and the resultant identifiable trends can really be trusted, and it's getting harder to get a handle on that with the endless and growing government and central bank interference..
I think in the short term, because of COT and silver, the price of silver may jump as high as 20 percent. Over the long term there is a question for silver, especially after years of asserting shortages by silver bulls haven't played out.
Once the expected rebound happens, I think silver will struggle to maintain its price support in the current global economy.
As for the Fed thinking about winding down its asset purchase program, there's no way that's going to happen in the near future, no matter they like to include the remarks of an occasional contrarian in its minutes.
A factor in the equity rally is also the low interest rate, as that has pressed investors preferring cash holdings to invest in blue chip equities with good dividends if they want to protect the buying power of their capital. Now it appears they're heading for big tech companies as they accept more risk.
Other supports for the gold price are continual buying by central banks around the world, and when gold ETFs reverse from outflow to inflow. Soaring demand for gold coins is also offering support.
One factor in the reason commodity prices aren't rising is because companies are generating much of their earnings from cuts, rather than growth.
I think another reason they don't think the stock market is back is because performance is related to cuts, rather than growth, in a larger number of companies.