Michael Shulman

Research analyst, long/short equity, dividend investing, etf investing
Michael Shulman
Research analyst, long/short equity, dividend investing, ETF investing
Contributor since: 2007
Company: Otterbourn LLC
S+P said the stock is worth $226, I agree based on today's results. Fabulous across all product lines.
Thank you, heaven forbid someone posing as an analytical type would do some research -- or given SDRL is a Norwegian company, and the Norwegian sovereign wealth fund a big investor in the company, a dividend might make life a bit more difficult for the company back home
The comparisons to the industry are specious - you guessed it, I own lots of WFM shares - and actually serve a bullish argument. WFM's growth rate is several multiples of the industry average - depending on what measure you use, 4 or more times faster than the industry. If you parse the metrics used in this piece, negative comparisons are used to the sector and then to the market itself, you cannot use both. WFM is radically outperforming the industry - is that the metric to invest by? Or is it expensive compared to the market? Oh, the author forgot to compare the forward P/E to the market but selectively managed to compare it to WFM's projected growth rate. There are logical reasons to be bearish on the company - they very well cold reduce their forecasts again, we don;t know, no pattern is in place - and the stock and logical reasons to be bullish - I am bullish. I will always buy a well managed company growing four times faster than it's sector and not near market saturation. But to make that argument I will not select data to serve my cause - which this author did, and for that reason his reasons for being bearish are not credible.
Charts are nice, reality is better. I would not be surprised if the vast majority of share selling is tax related -- the insiders in question probably have options, depending on how they exercised the options and what kind of options they were, they might have serious taxes facing them. The other issue is these might be conservative, intelligent people who are cashing out over time - the stock has exploded since the crash. None of this really matters - what matters is ILMN is one of the finest companies on the planet, has crushed its competition, just beat expectations and raised its forecasts, do any "numbers' guys ever look at the real world before they decide to write and perhaps cost people a great deal of money.
The logic of this column, with serious respect for it's author, is so flawed it is the equivalent of someone playing poker on a Monopoly Board, which is the functional equivalent of trading based on a love of charts and numbers rather than focusing on the name - the property - in question. Sovaldi is the most important new treatment in all of health care since the first successful retrovirals used to treat HIV/AIDs. Oh, by the way, GILD is the market leader in those drugs and has been fore more than a decade. Insurers, other than the Veterans Administration, are happy (in private) toi pay for Sovaldi as due to the ACA they can no longer reject customers who have Hepatitis C. Sovaldi cures 90% of patients with Hep C; nothing else is out there; and if you think sales are outrageous now, wait until the first patient sues their insurer or HMO because they developed cirrhosis because they were denied Sovaldi and once the first veteran contacts the first Congressman to take up the cause for this drug, sales will accelerate even though they are on track to be the best ever for a new treatment. And did I mention in the coming quarters GILD will (probably, based on FDA) introduce a new and improved Sovaldi that eliminates the need for a separate regimen of interferon? GILD has been the best biopharma outfit on the planet for more than a decade, and has just re-invented itself and re-ignited radical growth. For the record, I own shares, I typically sell calls but not right now. I thought the stock was worth $110 in 1-2 years, I now think is is worth at least $140. Just an opinion.
I have sold QCOR puts so maybe I am biased. I have a simple investment thesis for QCOR. Uncle Sam (Medicaid) and health insurance companies do not let babies die or become permanently brain damaged. Strip out the noise and QCOR sales to other markets, just look at this business and the company's revenue and profit streams are solid. The recession reduced birth rates. this situation will probably reverse itself, possibly this year, and that means more Acthar sales.
My apologies, too much biotech on my desk, on my post I said Curis, which I do own, not Compugen, the subject of the post! Time for coffee.
For full disclosure, I own shares in Curis. No responsible management team would ever reveal the milestones for these in turn reveal the trial and marketing strategy for the drugs. Anyone investing in Curis needs to invest in their technology and approach, not one specific deal. And to try to value a biotech like Curis using any traditional metrics is laughable - they are going to succeed, and go up ten fold, stay stagnant with their one drug approved, and go sideways or slide or all their new trials blow up and so does the stock.
Someone wrote a tech company is only as good as its next product. Not true -- and Apple is a consumer product company, not a tech product company. Apple's success is based on the superiority of the ergonomics and integration of its product line - no competitor comes close - and the superiority of individual products. And reviewers say the iPhone 5 is the best smartphone, the iPad is the best tablet, the Mac is the best computer. Unlike "tech" companies, the integration across platforms and iTunes and iCloud guarantees ongoing demand from audiences already captured - something not guaranteed in any fashion for any other their competitors. Wall Street has always confused Apple with a tech company, no tragedy there, means you can get a company with $137 billion in cash and at least 20% growth this year at a 16% discount to the S+P 500.
Provocative headline, flawed view of the world, sorry. There is room in the world for two models in computers, phones and tablets -- a closed, high margin system providing superior integration, superior security and the best ergonomic experience and an open, low margin, commodity based system using the Android operating system. Google will have much lower margins than Apple on its hardware since it must complete against other Android tablets. Apple has never worried too much - publicly - about market share and uses new devices and features to naturally take market share from other products based on functionality related to price, not price alone. Last point - I am the only one who thinks this but if the iPad does come out in a seven inch form factor, I believe it will be for China and perhaps other developing markets, not the US or Europe.
According to ChangeWave Research (part of the 451 Group), and they do the absolutely best surveys on Apple products -- what was bought, was will be bought and so on - iPhone sales will be stronger in Q2 and Q3 than at any other time there has been an expectation of a new iPhone coming out within a set period of time. This not only reinforces what was written here, this demand, in this quarter and next, will supplement incremental demand from China.
Wishful thinking does not a rebound make. Staples has several parts and faces several kinds of consumer demand. The company sells core commodities -- paper, pens and so on. Amazon's selection is better and cheaper - my favorite disposable fountain pens are no longer available st Staples, I get them online. Specialty products are available -- again through Amazon - from third parties using Amazon as a storefront. Specialty services other than bulk copying are flat out better on the Web, a business dominated by Vistaprint. And bulk copying services are inferior to Kinkos. Then there is electronics - SPLS is suffering, like Best Buy, from AMZN, Costco and AAPL competition. There is not solution to any of these competitve problemls when you may low salaries and have relatively untrained employees.
About demand -- new business formation is flat to negative as is overall employee growth, the two drivers of core demand. A flurry of new itty bitty companies -- consultants -- the unemployed gong out on their own -- has ebbed. Core demand facing SPLS is going to grow in low single digits.
Does this mean SPLS is going out of business? No. Does it mean the stock is fairly valued? Maybe. Does this mean there is a greater chance the business will decline than a chance it will be able to resume meaningful growth? Absolutely.
Microsoft - the company and the stock - elicits strong, emotional reactions from almost everyone. The reality is is less emotional - the company, long ago, became captive to its customer base and code base, and given the size of both, has been unable to innovate and stay abreast or ahead of both technology and consumer preferences. MSFT was never an innovation machine - it bought MS-DOS, it was more than three year later with Windows (I worked for the first ever declared hardware vendor to sign up for Windows 1.0, we went bankrupt years before it shipped), most of its dominant applications were bought and its use of monopoly power combined with the bundling of applications brought it to its current size. This lack of innovation was mitigated by the innovation of applications developers -- and now, in the consumer market and increasingly in the business market, that is a problem. There is increasing demand for a seamless experience among devices and apps and the open system that is at the heart of Windows development obviates attempts to make Windows devices and apps work together as well as they do in the Apple world. The solution? Break up the company, something that should have been done long ago. In my opinion, today's MSFT is worth $20-$25 a share and will see average annual growth of no more than 5%-7%. Break up the company and it is worth $60 or more and each of three units -- apps, operating systems and gaming - could grow in double digits. This will never happen with current management.
The Citron research, if I read this column correctly, was an academic exercise with little relevance to the real world performance of QCOR. Underlying QCOR's performance is a simple reality -- while some audience members at Republican debates may want patients to die if they do not have health insurance physicians and insurance companies do not want to let patients die, especially babies. Because physicians do not want babies suffering from infantile spasms suffer brain damage or die, they will never participate in a clinical trial for a competing product to Acthar and would not allowed to do so as they must use the existing standard of care. Second, insurance companies do not want the publicity or the tort liability of having a baby die due to a lack of coverage. The Citron analysis is so flawed -- again, if what I read her6e and elsewhere no the Web is what they actually wrote - it is laughable. One last point -- the big growth for Acthar has been for on label use with MS patients, once doctors find something that works on MS patients they rarely move off it and when thy do it takes years to see a change in the marketplace. Just look at the time it has take Tysabri to gain market share.
Solar installations are only competitive -- even with 50% reductions in costs - against the incremental cost of generating electricity. They are now competing against sub $3 natural gas that will be available for generations due to fracking. Sub $3 natural gas is similar to sub $1.25 per gallon gasoline. I worked on solar energy back in the 1970s - I published my first paper in 1978 on industrial uses of solar energy - and the issues are the same. It is too expensive and when traditional fossil fuel generated electricity is expensive enough to justify solar, alternative fuels pop up. Bottom line - your vision of a solar future is laudable but wishful thinking.
Sorry, but, well,you are dead wrong. The MAC has outsized importance has a hub inside a home that cements the consumer's relationship to Apple. Every sale of a Mac that replaces a Windows system in a home that has yet to buy an iPhone or iPad is the foundation for those sales. And when Macs gain a certain critical mass in a business environment, a mass large enough for the IT& department or consultants to provide Mac support, data show iPads and iPhones soon follow. That7 is on the revenue side. Your analysis did not include an analysis of margins and Macs contribute much more to margin than iPads and even at 20% off revenue are critical to Apple maintaining margins and profit growth. Again, my regrets for being so blunt, but the revenue side tells less than half the story.
Two comments. First, no company in the last century as a) this market cap and b) this little market share. The company has enormous headroom to expand share, especially in computers. Second, sell calls. If you sell a combination of weekly and monthly options you get a yield of 20% per annum, assuming you are active, or 8%-12% per annum if you are not all that active. Spend the money or average down. The author should know better.
Real issue? The market cap and its role in the QQQs. I am never brief but there is little more to say -- the stock is trading at a ridiculously low multiple and may stay that way for a while. I own it and write calls every week, every month...
Bestill my quaking heart - someone who does fundamental research,understands Amazon and Apple and also recommends trades! You nailed this analysis -- of course I am an Apple and Amazon devotee, get everything from toilet paper to dog biscuits from Amazon, although they are not delivered to my kindle, they are delivered free - and I thank you for this piece. Yes, toilet paper.
In the real world, the downside protection for Nokia is the Finnish government. Apple needs none. Barring a market crash, owners of Apple can own the stock, not worry about the price five years from now and sell calls all day long. If you sell the monthlies twelve times a year you can create your own 8%-12% dividend to spend to average down.
It should be -- this company doubled revenues and profits during the Great Recession. It is the market dominator in the smartphone market without sacrificing margins; it is the market leader and dominator in the tablet market where it also the lowest price and best product. And while nobody notices it, it is growing the Mac business 25% plus per year, with margins double to triple HPQ and DELL, while their competitors cannot grow anything in double digits. More importantly, Apple has headroom - while it may be a leader in the smart phone market it has a low single digit market share in cell phones and a small market share in computers -- below 5% in the corporate market and 25% in the consumer market. You can look back a century but no company of its size relative to the market has had such small market shares in critical markets. Translation - it will double in size in three to four years.
Microsoft buying Research in Motion would be a case of a monopolistic company in the corporate market and losing share,slowly, buying another former monopoly in the corporate market losing share quickly. Microsoft is now a commodity company in the corporate world facing technological changes, plus Apple, that are slowly eroding share. RIMM is simply getting killed by a superior product with a superior user experience and a much larger ecosystem supporting its brand. The real solution for both companies is to break themselves up - Microsoft into three units, RIMM into two - and let creativity and innovation flow and create new market share.
QE III requires the Fed to expand its balance sheet and it is not going to use this capacity -- it is keeping in reserve for when Europe blows up. When Greece defaults, this year or next, the Fed is going to have to buy a lot of bonds or do currency swaps as it did during the last crisis and QE III is off the table until Greece and Ireland and Portugal and Spain are off the table.
There is an unfortunate reliance on textbook economics in most people's opinions and those textbooks are based on theories truly brilliant for their time and now out of date. Milton Friedman developed the construct of modern monetary theory people quote -- but do not read - in an era of the gold standard and fixed exchange rates. Given the nature of democracy and politicians in the US, the UK, the eurozone and Japan all four central banks supporting these currencies will reflate. What existing monetary theory does not account for is reflation among major currencies in parallel without the anchor of the gold standard. Logically, all four currencies can be printed to monetize debt without degrading their status against other currencies. And the thought that the yuan and/or a basket of currencies can somehow replace the dollar is amusing, ot use a polite term. So reflation and the printing of currency will probably be used in tandem over a generation without hurting the trading relationships of the four major currency zones. This will push up currencies of commodity driven economies and those now rigged to support exports such as the yuan. And if anyone looks back at the rise of the American greenback after the CIvil War, when it went into circulation backed by gold from California. there are interesting similarities. Bottom line: Rogers is a very bright, very creative guy who was right about commodities having a bull run. He also has been living off of that call for years, abandoned his country to move to Asia and is not someone to listen to when he spouts antiquated, half read monetary theory.
I am not a groupie or a fan of anyone but teared up when it was announced Mr. Haines had passed away. He was the best of all financial anchors - he never confused personal sentiment with analytical commentary, never mixed his own political feelings with the delivery of news or the questioning of guests. As CNBC slowly degenerated into a forum for Obama bashers, Mr.Haines would remind people the two biggest peacetime deficit spenders in history were Reagan and Bush Junior. When Barney Frank denied he pushed Fannie and Freddie into loosening lending standards too much, Mr. Haines did not laugh, he called up hard evidence that Frank had done so. His mere presence on the masthead kept some of the CNBC pundits in line. Perhaps his passing will serve to remind his co-workers the definition of the world "journalist." My wife, Jackie Judd, has won every possible award for broadcast journalism on the national level and she saw Mr. Haines in the same light. One day I wll leave a bag of Cheetos on his grave.
This is a very weak analysis and misleading conclusion. New homes compete with foreclosed homes, many of them close to being new. The inventory number to measure new home sales against is the inventory of new homes plus homes in foreclosures and listed. That is the number to measure sales against. And new foreclosures. Slightly less than three million homes went into default in 2010, only one million were taken over by the banks, and the past year, most will be foreclosed ans there are five more million seriously delinquent loans out there. Translation: new home sales will stay at radically reduced levels through 2014 and home buildes have absolutely no earnings power worth mentioning.
Deere is arguably the best managed US based manufacturing company facing a long term bull market for agricultural products. That being said, two tax breaks for ethanol are going to be allowed to expire at yearend -- they were extend ih 2010 because of the imperative to pass an extensio of the Bush era personal income ta cuts. Oil prices will fall after Libya settles down and the Saudis pump more to buy internal peace. Put the two together and plantings for 2012 are going to be less than forecast-- the next increment of corn production in the US requires extremely intensive means of production and farmers will not commit to this with uncertainty overhanging ethanol production. Some other points -- the rise in meat consumption in China and elsewhere will go from torrid to rapid growth and remittances to emerging nations are shrinking due to economic and currency conditions reducing growth in meat consumption. Bottom line - great company, lousy stock right now.
How are you measuring the addition of assets to the balance sheet and the parallel hit on free cash flow? Are you looking at the one year impact or the entire capitalization of a lease, which can be thirty years? If it is the latter your nunmbers need to be re-worked. Also, the model of using other people's money - the float - is at the very heart of Berkshire Hathaway's success. Buffett seems to have done all right.
Te application of value methodology to a company such as RIM is inappropriate given they do not pay a dividend in an environment where people appraising slow growth, mature companies such as RIM are also looking for yield. Using old language from the greatest tech guru of all time -- Andy Grove - we have reached an inflection point in the PDA/smartphone/handheld device market. RIM essentially produces smart PHONES and manages a text network; the world is rapidly shifting to hand held computers using an open network, the Internet. This is not just about products it is about culture. MSFT has been managing and responding to customers for a generation and has had not had a compelling new product developed internally during the same period of time. Going back to Grove, companies have to be willing to "eat their children" - and RIM has shown it is unwilling to do so. They will continue to produce more cash than most companies, and keep their brand very much alive, but the battles have been fought and won by Apple (high end closed system) and Android/Google (low end open system). There is no place left in the middle for RIM and the next decade will see them slowly decline in market presence as they continue to cater to their existing customers and have corporate culture built around phones, not computers.
Someone said AAPL is fairly valued at 15 times earnings, a discount to the market! The company has more than doubled in size during the Great Recession and has profit margins double its competitors. It also has enormous head room to grow. One way to estimate the price for the stock is compare AAPL to the S+P. Since it is growing earnings at an enormous rate, well above that of S+P earnings, it deserves a multiple to the S+P of at least 1.5. Grow earnings for AAPL at half the rate they grew in Q4 and you end up with a roughly $600 stock price.
I recently wrote about Apple (seekingalpha.com/artic...) as the stock of the last decade and the one to come and cited Mr.Jobs' health as a possible bump in the road for the stock, not the company. I am not a physician, have spoken to a few about this and the consensus is after the procedures he has undergone this may, and I repeat may, be about his immune system and the resolution of problems with this part of human physiology cannot be predicted. They also typically require rest and isolation from other individuals. Of course, this is speculation. What is not is the quality of the company and its products and assuming the market sells AAPL off tomorrow there is no reasons to assume the shock will not wear off. The company is on a roll, doubling in revenues during the Great Recession and Job's views are deeply embedded in the corporate culture.
To JPZaragoza - did you see the photographs from the Phase I?