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Robert McDonald

 
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  • Cisco Predicts Mobile Data Traffic Explosion [View article]
    I call the mobile web buildout Dot.com II. Some significant portion of what Cisco is forecasting is already in progress and this can be counted on to happen. It is in the early days and one can also expect valuations of the companies providing picks and shovels to get quite frothy in the longer term just like Dot.com. Right now however the prices are quite reasonable. If you are or do invested keep your eye out over your shoulder but I think we can enjoy the ride for quite some time. Companies involved in this amazing mobile web build out include Cisco of course, Finisar, JDSU, Ciena, QCOM, Broadcom, NVIDIA, ARM, Skyworks and the various cloud computing players like FFIV, Citrix and VMware.

    Due disclosure: Long in all of these companies
    Feb 2, 2011. 10:41 AM | 2 Likes Like |Link to Comment
  • Microsoft Grows Revenues 5% in Q2 to $19.95 Billion [View article]
    The fact that Microsoft's Windows revenue is now going down says that there is significant chink in the armor. I need to do some homework on whether Microsoft's ability to deliver a successful Azure platform will contribute to or degrade earnings. I need my long pending hold or sell decision.

    Cloud computing is not necessarily a good thing for Microsoft as this adds many opportunities for MIcrosoft's competitors to further intrude on key business areas. It will surely degrade revenues and earnings from Microsoft Office. You just can't charge as much for a license in the sky as you can for one that is your PC hard drive.

    And of course the competition includes Apple and Google, two very competent players that have a track record of doing a much better job of what Microsoft could have been doing.

    I am pretty sure that the decision is going to come down on the sell side.
    Jan 28, 2011. 11:22 AM | Likes Like |Link to Comment
  • EMC Delivers Strong Fourth Quarter, Ups 2011 Outlook [View article]
    VMWare's growth is one key factor however there are at least three other key drivers in the pricing of its stock:

    1. EMC will benefit significantly from the growth of cloud computing and continue to benefit from storage growth demands in general
    2. EMC is a potential acquisition target
    3. They are a well managed company with a long term success record

    And they are very reasonably priced with a forward PE of 15:1. I just doubled my EMC position.
    Jan 26, 2011. 09:14 PM | Likes Like |Link to Comment
  • Big Banks: Big Bang or Big Bust? [View article]
    There are too many problems in the banking industry including a lack of being forthright about their off the balance sheet problems, WFC in particular. Foreclosures are not winding down and the banks are trying to keep investors from paying attention to business fundamentals. If that were not bad enough, the business models that took them to high earnings and high valuations before the meltdown are broken and have no obvious replacements in sight. They also still have bonus systems in place that pay people to cheat. Buyer beware.
    Jan 26, 2011. 01:49 PM | 3 Likes Like |Link to Comment
  • Why Verizon's iPhone Sales May Disappoint Apple Investors [View article]
    I AM A DROID EARLY ADOPTER ON VERIZON AND WILL DUMP THAT PROBLEMATIC DEVICE AS SOON AS MY VERIZON CONTRACT COMES UP FOR RENEWAL MID YEAR
    Jan 24, 2011. 11:43 PM | 2 Likes Like |Link to Comment
  • Nvidia's Tegra 2 Chip Joins Android in Riding the Mobile Market Train [View article]
    Buy long term options call LEAPS. These high leverage investment vehicles have 1-2 year out expiration dates. You do need to be vigilant while holding any option as your investment valuation can go to zero in a major market sell off or company performance problem. The value of a LEAP is that there is 1-2 years for things to recover unlike short term optoins.

    I do have to also say,NVIDIA is pretty rich for LEAP purchase. I prefer to buy LEAPS for stocks that have been beaten up time sensitive issues and not long term performance issues.

    The good news is that returns can be quite high, for example my year old Apple LEAPS have returned 164% on the invested capital. Another advantage of options like this are that the maximum loss in the presence of disaster is limited to a fraction of the stock price whereas in the ultimate disaster case if you owned the stock outright you would lose the full value of the stock.
    Jan 24, 2011. 10:06 PM | 1 Like Like |Link to Comment
  • Top 10 Hidden Management Failures [View article]
    The JDSU issue is a timing issue and not a management issue. Early investors during DOT.COM I had over 1000% return on their investment. That is if they bought early and took their profits at the right time. Those who held on in the face of obvious DOT.COM excesses driven in part by investment banks and their pumped up analysts lost their gains and maybe their shirts as well. Those who ignored the overbuilding that was going and bought near the top lost >90% of their investment if they held on to the bottom.

    Again it all had to do with timing and not management failure. Cisco investors would have had a similar roller coaster ride during this timeframe and most folks thought Cisco is a well managed just as they do now.

    We are now in the early stages of what I call the dot.com II internet build out. This is being driven by the mobile web and the growth of cloud computing. The fact that the internet is truly worldwide in this build out adds to the incremental demand. JDSU, Finisar, and Ciena are well positioned and will be a very nice ride for investors in this second wave of internet build out. However, those who invest in these stocks should be very vigilent and watchful of any signs of excessive stock valuations and/or overbuilding in response to these new demands. We have quite a ways to go but I recommend never taking your eye off the possibility that the real boom is coming to an end and stock valuations are in a bubble.
    Jan 24, 2011. 09:41 PM | 2 Likes Like |Link to Comment
  • Why Apple / Facebook Makes Sense [View article]
    Correction: I will not be buying Facebook stock directly. Any interests I have in Facebook occur as the result of owning NASPERS. NASPERS is a great African media company and emerging market internet play (up 30% since August 2010).
    Jan 23, 2011. 07:38 PM | Likes Like |Link to Comment
  • Why Apple / Facebook Makes Sense [View article]
    Wait until all those 20 somethings turn 30 and find that the information they posted on Facebook is compromising their lives including problems with job applications and employers, court processes and significant others. Wait until Facebook has multiple lawsuits for giving spammers, con-artists and folks from the lower edge of humanity their personal information on their members. Facebook better do their IPO soon because their valuation may not be so hot after the proverbial stuff starts to hit the fan. Google and Apple are companies with substance and adults at the helm....they do not need Facebook. i have said it before in another post -- I do not think I will not be buying Facebook stock. I do need to note an exception, I do hold a smal lindirect interest in Facebook by owning NASPERS (NPSNY). (Naspers owns 32% of Digital Sky Techologies via Tencent and direct investments, meaning that they also hold a 3.2% investment in Facebook via their DST holdings, This holding would be worth about $1.5B if Facebook as a value of $50B).
    Jan 23, 2011. 07:23 PM | 1 Like Like |Link to Comment
  • Dividends Not Falling at All From Apple's Tree [View article]
    Stock buybacks seldom add real value for the investor. Apple has lots of good ways to spend some major portions of their cash.

    One way is to increase the momentum behind their move into cloud computing. This will add significantly to their leverage and market share as they penetrate business applications as well as provide video and music downloads around the world. They have no need to buy Netflix -- a partnership is already in place. Apple already uses the cloud to support mobile we. This includes the iPhone and iPAD aps as well as the new iMobile and Mobile Me products that are in their early stages of development.

    Ten server farms like the one they just built in North Carolina dispersed around the world would cost something like $10B -- a pretty good use of the money in the bank. Apple can spend this kind of money without breaking a sweat or their bank account or adding debt unlike most of their competitors.

    They can also spend some of this cash taking the next steps with iTV and a home entertainment system. The existing Apple TV box is simply an entry point. Apple must be working on a home entertainment system. I would imagine it might be one box does all with the possible exception of providing the video monitor and speakers. TIVO might be a good acquisition as the cable and internet video interface provider The video monitor and speakers can best be made by others however they can be sold as part of the entertainment center option package.

    I would imagine that this box would control all entertainment functions with an iPAD like device. I would love to finally be able to send all those remotes and all the extra wiring to the recycling station.

    Spending their money in ways like this would return a lot more money to investors in the form of stock appreciation than any realistic dividend. Dividend payments are for when Apple's organic growth slows down and they have no other high payback ways to use the cash. Dividends can be used at that time to goose the stock price. Investors will then continue to hold a slower but still high growth entity at least for the period of time when the dividend payments are increasing.
    Jan 23, 2011. 03:47 PM | 2 Likes Like |Link to Comment
  • Why Apple May Present a Buying Opportunity [View article]
    I should have mentioned Apple's Mobile Me which is a cloud based phone sync and file storage utility. There is every reason to believe it will be expanded to many uses with time.
    Jan 23, 2011. 12:16 PM | Likes Like |Link to Comment
  • F5 Networks' Revenue Guidance Spooks Wall Street [View article]
    Thoughtful commentary on the 20% F5 Networks selloff -- thank you. I use overdone selloff opportunities like this to buy LEAPs (long term options) to leverage return on the inevitable rebound. I have been following this stock for some time but always felt the P/E to be to rich. Now that some of the momentum guys got off the train, it was a good time to get on board for at least a 1 year hold.

    Based on Friday ask quotes you can buy a Jan 2012 strike price $110 LEAP for $22.40 per share. If the stock goes back to $120/share the LEAP bid price will go to about $27 giving you a greater than 20%, possibly in a few months. The ask on a Jan 2013 strike price LEAP was $30.80 and you can expect the bid to go to about $35 if the stock returns to $120 giving you a nominal 15%. The shorter term LEAP is cheaper in terms of up front money but the longer term LEAP gives you the choice of hanging on for another year to reap the benefit of more growth and some breathing room for recovery in case there is a sell off due a general market problem or F5 specific problem.

    Now would also be a great time to buy Apple LEAPs for similar sell off reasons. The Apple LEAPs I bought in the first quarter of last year have a net gain of 173% as of today.

    The great thing about LEAP is that you have time for recovery if something happens and you do not need relatively expensive and complicated insurance like collars and other option strategies. You do however to be prepared in disasterous selloff situations like the Financials recently caused, the great recession, to get out early on if you can see it coming, or prepared to loose all your dough. Unlike a stock however the downside is limited to the amount you paid for the LEAP and not the entire valuation of the stock.
    Jan 23, 2011. 10:56 AM | Likes Like |Link to Comment
  • 65 Times Forward Earnings for Arm Holdings? 'No Problemo,' Says Goldman Sachs [View article]
    Not all ARM applications will need or even want Win 7 applications. It is not hard to have designs with and without compatibility. They will also be able to charge more for Win 7 capability and probably other enhancements they may have in the pipeling. Certainly the IBM and NVIDIA agreements with ARM are going to provide some innovative opportunities.

    On the other hand any investor should be aware that the Analyst community is only one source of information about companies and in many cases is far from the best ones. Analyst output is paid for by the companies they work for and is biased accordingly plus the analysts themselves have their own biases and do incomplete homework.

    If you really want to get the best returns from stock market investment returns treat what analysts saying with a BS and competency detector running and make your investment decisions based on many sources of information. No one is saying investing it easy but if you are going to do it take the time to the homework, the payback can be better than "working for a living."

    PS: I have the same take on Money Managers -- don't ever assume these guys have you as the number one priority. That will cost you even more.
    Jan 22, 2011. 10:59 PM | Likes Like |Link to Comment
  • Why Apple May Present a Buying Opportunity [View article]
    Apple does not need to buy any large company like Netflix or Sun Micro. They are slowly entering into the business world in a very carefully controlled way. Penetration in many cases is driven from the bottom up (the proverbial camel's nose under the tent -- pretty soon you get a major part of the whole camel inside).

    One has to be aware of limitations even a very well managed company like Apple has. How much can Apple take on? And the business world is not forgiving if you make big mistakes a relative new comer. Apple for one know their limits and does not want to have failures (unlike a certain large company whose name starts with M). They have more than their hands full right now with all of the success in the consumer world.

    It might be noted that Apple has six major product lines (iPhone, iPAD, iTunes store, MAC, iPOD and iTV in its infancy). Microsoft has maybe three big products (Win 7, Office and Xbox/Kinect) and Intel has one cash cow (X86 microprocessors, they are not making money in mobile and may never make much compared to the high margin W86 line). A number of Fortune 500 companies are also evaluating iPADs for corporate use, iPhones are becoming common and MAC enterprise penetration is accelerating.

    Apple has other corporate opportunities that they must be aware of and cloud computing is a big one. They already have some significant pieces in place. You have to believe they are thinking and planning on this. First of all they are already in the cloud with iTunes Music and Video delivery and their first version of iMobile for video downloads to iPhone and iPAD.

    They also have a large server farm which is coming up in North Carolina and the money in the bank for many more server farms around the world. The iPAD afterall requires the cloud for data and applications and is potentially a very good portable cloud computing tool for the enterprise. Citrix has already announced a platform that enables Windows 7 operation on the iPAD. The MAC book aire with no hard drive is high performance laptop with only limited flash memory on board. Obviously it is assum assumed that larger data storage functions are in the cloud.

    Hang on to your hat -- $400/ share will probably happen year end in the absence of some unforeseen market disaster and $500 plus is a slam dunk in 2012. Be long or be left out.

    Due Disclosure: Very long on Apple LEAPs
    Jan 22, 2011. 10:25 PM | Likes Like |Link to Comment
  • Apple: Cheaper Than I Thought [View article]
    PS: The market price of a stock by itself has nothing to do with whether it is overpriced or underpriced. You have to look at the market price in terms of how it relates to other key parameters that determine a fair valuation. By any commonly used metric for stock valuation Apple stock is a bargain. The reason Apple stock price might seem high is that the stock has not split during its entire 3 year run up. During the dot.com days a high performance stock like this would have been split at least two times -- that is why MSFT has a $25 dollar price tag today. Without splits MSFT during its high growth years would have a price higher than Apple today and ditto on Intel.
    Jan 20, 2011. 10:47 AM | 1 Like Like |Link to Comment
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