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Jeremy Johnson, CFA

 
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  • Vodafone (VOD +2.2%) spikes after Verizon (VZ +0.4%) CEO Lowell McAdam says his company is capable of digesting Vodafone's 45% stake in Verizon Wireless. "We have always said we would love to own all of that asset," he reminds us. The fact Verizon Wireless is now making giant cash distributions gives Verizon more incentive to make a deal, but the fact Verizon has $53B in debt complicates matters. McAdam also suggests Verizon won't be following T-Mobile's lead in eliminating phone subsidies. "I don't think U.S. consumers are ready to buy an iPhone for $700." [View news story]
    VZW is VODs best asset when considering cash flow and stability (South Africa is a good earner, but questionable stability). I doubt they have any interest in selling.
    Jan 7, 2013. 08:30 PM | 2 Likes Like |Link to Comment
  • More from the Fed: The FOMC has adopted economic thresholds for when it would commence tighter policy. The fed funds rate will remain at exceptionally low levels as long as unemployment remains above 6.5% and inflation is expected to be no more than 50 basis points above the 2% target rate. [View news story]
    The Fed will buy bonds as long as the government is running ~10% budget deficits. The government will run ~10% budget deficits as long as they feel it is necessary to keep GDP growth above 2.5%. Even if inflation goes to 4%, the Fed will merely raise the short-term rate a percent or two in order to make the rate less negative than it otherwise would be.

    Unless there is a political storm (on the order of a third party gaining material amounts of votes) due to US Treasuries outstanding / GDP reaching some significant milestone, 150%, 200%, etc., this strategy will not change.

    However there will still be huge amounts of debate in Washington about where the money gets spent, everyone will want there piece. Fiscal cliff is really about who gets what, not how bug what is.
    Dec 12, 2012. 02:28 PM | 5 Likes Like |Link to Comment
  • Why do investors continue to pour money into EWJ and expose themselves to currency risk when the DBJP offers the same Japanese stock exposure, but hedged against the yen? Another of Dennis Hudachek's 10 Overlooked ETFs is the INDA, tracking the same Indian index as the INP, but with lower expenses. And don't forget IAU, basically the same exposure as GLD, but at 15 bps cheaper per year. [View news story]
    The Yen is about fairly valued where it's at. Also, the Japanese stock market tends to move inverse the currency. When you fully hedge, your position becomes more speculative, not less. There are decent amount of dollar earnings in Japanese companies as well. I would not hedge over 50%. I personally hedge 25% on my Japanese portfolio, but purely to reduce volatility in USD terms. It will probably hurt long-term returns.
    Dec 7, 2012. 08:28 PM | 1 Like Like |Link to Comment
  • Why Analysts Missed The Apple Correction [View article]
    I think you are fooling yourself a bit that sell-side analysts haven't for a very long time, if not always, been salespersons first and foremost. Sales people are not inherently bad, it is rather just their job to present the good aspects of a product / service / financial instrument. Since issuers pay most the bills, research analysts that serve issuer needs self-select to stay in those roles. No one is telling you what to do, but the promotions go to those that can help sales move paper.

    There are times when it has been easier. During sustained bull markets, you can get by slagging off more of of the losers, but those times usually don't last long enough to build a career.

    Keep your use of the sell-side to fact-based data gathering and free food.
    Dec 7, 2012. 08:12 PM | 1 Like Like |Link to Comment
  • Is There An Undervalued 3D Printer Manufacturer? Yes: Arcam AB [View article]
    Maybe the fact it has a $50 million market capitalization has something to do with it.
    Dec 3, 2012. 04:29 PM | Likes Like |Link to Comment
  • Exelon: Potential Dividend Cut May Be Deeper Than You Expect [View article]
    Natural gas was $13 in 2008. Nuclear assets had different cash flows then. Natural gas isn't going back to $13 and neither will electricity pricing go back to where it was for many many years, perhaps decades.
    Nov 30, 2012. 06:56 PM | 2 Likes Like |Link to Comment
  • What Amazon.com Selling Double The Kindles Really Means [View article]
    I have often had 50 pound items sent to me free of charge by Amazon. On some occasions even by 2-day mail. I have often wondered if UPS/FedEx aren't eating some of these charges through their contracts with Amazon.
    Nov 30, 2012. 12:16 PM | Likes Like |Link to Comment
  • What Amazon.com Selling Double The Kindles Really Means [View article]
    I did read that piece of yours, good work. That gets back to the biggest knock on Amazon in my view (and one I agree with) their capital investment is not producing the same incremental returns it did 3-5 years ago. This is a serious problem and one that will be recognized sooner or later if it continues.
    Nov 29, 2012. 09:39 PM | 1 Like Like |Link to Comment
  • What Amazon.com Selling Double The Kindles Really Means [View article]
    I think the market (not me) is assuming $4.5 billion which is simply a 4% free cash flow yield, a premium to a business like Target which is more in the 5.5% area.

    I am not saying that is what Amazon actually generates. It might, but the issue is very contentious and I am choosing not to state an opinion on the matter.

    When companies invest it is in R&D, marketing, physical assets, etc., so that is where the discretionary cash flow is going. The trick in any growth business is determining how much of that spending is necessary to sustain current revenues. Clearly, in the case of Amazon, not all of it is; hence, some is discretionary.
    Nov 29, 2012. 09:30 PM | 1 Like Like |Link to Comment
  • Talking Soda [View article]
    Thanks for the info.

    Unfortunately, I don't consume sugar at all (not for medical reasons) so the machine would be a bit of waste for me. And the tap water in most but certainly not all of California does not taste that great!
    Nov 29, 2012. 07:47 PM | Likes Like |Link to Comment
  • What Amazon.com Selling Double The Kindles Really Means [View article]
    I think the market assumes they generate about $4.5 billion of discretionary cash flow. In my view the biggest knock on Amazon is that their growth is becoming markedly less capital efficient but I am not sure what series of events will lead to a crisis of confidence in the company. If the CEO waits for a stock crash to pull back on spending for growth, it could wreak considerable havoc on the real business. I hope he understand this.
    Nov 29, 2012. 07:35 PM | Likes Like |Link to Comment
  • Talking Soda [View article]
    This is sort of my position. I know people like to rail on short sellers, but in terms of real power on Wall Street, a firm like Fidelity owning 13% of your shares speaks volumes. These are the guys that can move the needle with a series of phone calls, including not allowing the shares they own to be borrowed (although I am not 100% sure how this works when held in a mutual fund). But if I am a long and I like the company then I want there to be short sellers, because then I can get more shares without moving the price. Capacity is a huge issue in a smaller name like this for multi-billion dollar funds. End of day, the high short interest has always had me a bit confused. I think there is a story here that hasn't been fully told.
    Nov 29, 2012. 07:22 PM | 1 Like Like |Link to Comment
  • Talking Soda [View article]
    It would an extremely predatory thing to do for any retailer, legal questions aside.
    Nov 29, 2012. 07:06 PM | Likes Like |Link to Comment
  • What Amazon.com Selling Double The Kindles Really Means [View article]
    How much discretionary cash flow do you think AMZN generates at run rate?
    Nov 29, 2012. 06:46 PM | Likes Like |Link to Comment
  • Talking Soda [View article]
    I think it was an attractive short for 3 months in mid-2011, but that was quite some time ago now.
    Nov 29, 2012. 06:14 PM | Likes Like |Link to Comment
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