Activision (ATVI) stock has recently been under pressure on news that Vivendi might be looking to sell a large chunk of shares. Currently owning 61.5% of the company, Vivendi pulling out could/should depress the stock price.

With Diablo on the market and Mists of Pandaria expected soon, Blizzard will have nothing to get investors excited about, at least not to the upside. We do, however, have WoW subscription numbers to lose sleep over. Subscriber losses have been a major driver of the stock in recent quarters. But Blizzard has an ace up its sleeve.

Codenamed "Titan", Blizzard has been working on its next-gen MMO for years now. Investors probably wouldn't have a clue if not for a leaked production schedule targeting a 4Q13 release date. WoW was announced in September 2001 and released in November 2004. If investors are expecting a 4Q14 release, we should have already had an official

Because Apple's stock is down, financial news outlets are on the prowl for an explanation. There is no good explanation, but the explanation that seems to have stuck is the risk of carriers cutting subsidies.

Carriers might cut subsidies, but Apple is not at risk. Let's assume that carriers worldwide cut subsidies across the board by $30. This chart from IDC shows smartphone market share in the most recent quarter:

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We see Samsung with 29%, Apple with 24%, and everyone else combined with 47% of the market. Compare these market share numbers to these charts from Asymco showing the profit share of the major smartphone manufacturers:

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What this shows us is that except for Apple and Samsung, smartphone manufacturers are either not profitable or marginally so. If every manufacturer made $30 less per smartphone, Apple would barely notice

Life Partners Holdings Inc. (LPHI) was recently the “idea of the week” on Sumzero.com, a website I like to use for networking and to find new investment ideas. I decided to take a look at LPHI, and I was pleasantly surprised to find that the business model resembles Deckers (DECK), a business I love. They both operate with zero debt and have solid EBIT margins, meaning the bottom line shouldn’t be too volatile and there’s almost zero bankruptcy risk. But more importantly, both companies are growing at a spectacular rate despite negligible reinvestment. They take the money they earn each year and either pay a dividend, repurchase shares, or put cash in the bank.

LPHI’s capital expenditure in the LTM was $400k, compared to cash flow from operations of $26.5 million and net income of $30.5 million. This is typical. However, they have managed to grow

Deckers Outdoor Corp. (DECK) has an amazing business. Since 2001, it’s grown revenue at a CAGR of 33.5% and it continues to grow in 2008. More importantly, it’s grown EPS at a CAGR of 55.6%. But what’s probably the most amazing thing about this business is that it’s grown with minimal reinvestment. A significant portion of FCF has been put in the bank each year, growing cash & investments from $3.9 million in 2002 to $175 million LTM. This compares to total CFO over the same time period of $212.6 million. Of course, past performance is no guarantee of future success, but it doesn’t matter because you’re not paying for it. The stock trades today at 10x earnings. On an EV basis, it’s about 20% cheaper.

Overview of Business

DECK manages a portfolio of footwear brand names including UGG, famous for their women’s sheepskin winter boots that are so comfortable

Introduction

Eastman Kodak’s (EK) business has been in decline for a long time. Share prices peaked in the mid ‘90s and have generally been in decline since. The consumer transition away from traditional film to digital products was too overwhelming for management to deal with effectively, and probably would have been even if they read the tea leaves perfectly.

However, it is no secret today that film has been in a long and permanent decline, to the market or to management. And management has been taking steps for the last decade to right-size and reorient the company, resulting in employment decline from 74,000 in 2001 to 20,400 employees today. This has been accompanied by sustained restructuring charges in the range of $600-700 million every year.

If Kodak continues restructuring at this rate, they will have no employees left in three years, creating a fundamental catalyst for restructuring charges to end

I read an entire book about shipping containers in an attempt to better understand market forces in the shipping industry, and I quoted a few paragraphs of it in the introduction to my report on Pacer International (PACR). In The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger (Princeton, 2006), Levinson himself describes his book as something he “stopped talking about altogether, simply to avoid the embarrassment that every mention of the topic would bring”. My goal was to get a better understanding of the industry’s history so that I would have a clearer picture of where it’s heading in the future. I’m still absorbing some of what I read, but what I got out of “The Box” was something else entirely.

90% of what this book demonstrates is how poorly people were able to predict the effects of containerization

Supply chains like Barbie’s are a direct result of the changes wrought by the rise of container shipping. They were unheard-of back in 1956… and in 1976 when oil prices brought sky-high freight costs that stifled the flow of world trade. Until then, vertical integration was the norm in manufacturing; a company would obtain raw materials, sometimes from its own mines or oil wells, move them to its factories, sometimes with its own trucks or ships or railroad; and put them through a series of processes to turn them into finished products. As freight costs plummeted starting in the late 1970s and as the rapid exchange of cargo from one transportation carrier to another became routine, manufacturers discovered that they no longer needed to do everything themselves. They would contract with other companies for raw materials and components, locking in supplies, and then sign transportation contracts to assure that their

Trinity Industries (TRN) is undervalued for two reasons:
1) Short-term earnings expectations from analysts and management are very low due to macroeconomic concerns justified by a significantly diminished backlog of orders and new order inflow. However, long-term earnings expectations are still strong based on industry fundamentals and independent forecasts for product demand. Even taking the most pessimistic scenario that I can concoct, TRN appears undervalued by over 50% at a present share price of around $10.

2) Earnings have been systematically understated due to the method of accounting for transfer of assets between subsidiaries. If we separate the railcar leasing division from TRN, the combined pro-forma earnings would have been between 10-30% higher over the past few years. This difference should continue as long as TRN builds its railcar leasing fleet, but if we froze the business today and simply let the assets generate revenue, shareholders would reap the

PDL BioPharma (PDLI) was a biotech research and development company until recently when it spun-off the research and development portion of the business, leaving behind six employees and seven patents to protect. The patents protect PDLI’s antibody humanization technology, and will be expiring between 2013-2014, at which point the remaining shell company will be dissolved. Until then, PDLI’s remaining six employees are working to monetize the patent pool through sale, securitization, or in the worst-case scenario, generating royalty revenue (no actual production is involved) and effectively maintaining a 100% dividend payout ratio. With clear guidance from management provided in the most recent conference call, valuation boils down to a simple discounted cash flow analysis.

Background and Science

PDLI’s patents protect “novel methods for producing, and compositions of, humanized immunoglobulins”. Immunoglobulins (more commonly known as antibodies) generally identify abnormal foreign material within the body such as allergens, bacteria, and viruses.