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Robert McDonald

 
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  • Intel: There's Certainly A Bull Case [View article]
    The valuation "problem" you refer to has to do with margins. And it is a very real issue.

    Intel's process technology is the best in the world but it is expensive requiring $5B state of the art wafer fabrication plants.

    X86 microprocessor devices with by comparison huge transistor counts (read expensive) have been the cash cow for Intel back to the 90's and still are. Sales of X86 devices for PC's are falling at a faster rate than those designed for server application are growing. Look at the numbers.

    Margins on Intel's mobile web devices will be crushed to the minimum by competition from microprocessors based on ARM designs. The biggest competition is currently Apple's A series of devices (used only by Apple) and QCOM current and future Snapdragon processors. Companies like Nvidia are also ramping significant competition in the mobile web market place using ARM based microprocessors.

    And to make it worse, Intel is now going to have to contend with direct competition to its X86 line from companies supplying Windows 8's on ARM processors. These will not only include devices designed for mobile web devices but chips designed for server control as well.

    Intel is a great well managed company but they are about to encounter competition to their X86 line like they have never had before. Entry into the mobile web device marketplace is no panacea for their declining margin problem.

    Due disclosure: I am heavily investing in Apple and QCOM and sold the last of my Intel earlier this year.
    Oct 2 10:19 AM | 7 Likes Like |Link to Comment
  • Trading The Odds Of An Apple Dividend [View article]
    Jason,

    I like many of your writings and as a result have subscribed to your newsletter and will be at the March Apple Investors Summit in LA that will be chaired by yourself: http://bit.ly/yYXjmK . I hope to meet you at that time.

    However I believe you are making less than optimum investment recommendations in your use of short term options as your prime method for investing in AAPL. If you had been using long term LEAP call options (Jan 2013 and Jan 2014 calls) you could have operated much more flexibly and stayed invested through the possible short term selloff that you incorrectly predicted in your last SA article: http://bit.ly/AFmwGz. It would have been a whole lot cheaper that way and involved doing nothing.

    I submit that the usage of short term options is a high overhead distraction and lower payback method vs. the LEAP longer term opportunity. If things really get bad you can also sell a LEAP at anytime. Short term judgments about Apple pricing direction, particularly by the usage of history, are bound to have a high error rate. More simply put you could have avoided the costly churning and lost opportunity that has been associated with your recent recommendations.

    I would submit that predicting the longer term AAPL share price trend has been relatively easy compared to any other stock I have ever invested in, or have followed for that matter. And if you use it right it is a powerful tool to make a lot of money. If there ever was the perfect stock for the use of leverage in the form of long term stock options (LEAPs), this is the one. All of my LEAP positions have paid off handsomely for at least three years with returns ranging from 100 to over 200%. My Jan 2009 positions, the only positions close to losing money over the last 4 years, broke even despite the 2008 meltdown.

    Using short term options is a prescription for losing money if for no other reason then the cost of the churn. Being consistently in the market is your friend in the case of Apple. By continuously turning over short term options, you are taking a big chance on losing out on the potentially higher returns that are possible by investing money in the long term trend.
    Feb 22 02:59 PM | 7 Likes Like |Link to Comment
  • Apple Earnings: A Rare Growth Opportunity [View article]
    I would add that Apple is a different kind of company than Wall Street and Main Street have seen before. These folks are still coming up to speed on the potential value here. There is also the fact that some do get it and have the leverage and or it is their business to benefit from a trading platform where they can count on an ever increasing underlying value. In other words they have been given the benefit of trading in a stock that is moving in fits and starts for lots of reasons, but where ultimately the market price of the stock is on a strong upward trend. Water, or valuation in this case, will ultimately seek its own level.

    Why don't may Wall Street and Main Street investors get what is going on here? Here are some of the reasons:

    1. Apple is not a tech company or a internet company or a dot.com type of investment. It is a powerful and unique business enterprise that has no equivalent precedent.
    2. Apple is a successful business enterprise that has a number of integrated synergistic businesses that are as well managed as anyone could hope. These businesses are all in or are benefiting from the highest growth areas in the worldwide economy. These include mobile, the mobile web, mobile computing, the use of Aps vs. software suites in all computing areas, customer friendly and reliable software (vs. MSFT and ADBE for example), entertainment, games and not to be ignored, cloud computing services, consumer now enterprise later. In addition they are a retailer with cutting edge marketing skills and techniques, and they produce very functional products with Gucci like design features. As if this were not enough, the Apple enterprise, despite its size, is an unprecedented inventor of highly popular cutting edge products that people want independent of place in the world or culture; products that people did not know they wanted because they did not exist yet.
    3. I am not aware of any company that has integrated so many synergistic and successful businesses into a successful enterprise system under one management roof, an ecosystem that has unprecedented customer friendliness and stickiness. In the past no one company has been able to pull this kind of thing off. What is also amazing is that customers love this and are not pushing back as the systems where they have beed defacto trapped, e.g., Microsoft Windows and Office.

    I say, take advantage and buy Apple while it remains undervalued and enjoy the ride. This is also a great stock for use of LEAP strategies and time weighted averaging techniques. Buy some when it is sold off, usually between Jan and July, and buy some before dynamite earnings reports are likely, like the one next week. Consider yourself having been given an investment gift that only occurs a few times in an investment lifetime.
    Jul 17 02:15 PM | 7 Likes Like |Link to Comment
  • Apple's Mini 'Flash Crash' Today [View article]
    Thanks Andy, I have been looking for a reason for the Apple sell off today since right after it hit bottom. You are the first one out there commenting and giving a very credible reason for what might have happened. I had a similar theory but having someone collaborate the possibility was helpful.

    Selling on good news could also be a contributer. There are some of us with huge capital gains and lot of mine were in 2012 LEAPs (long term options). It was time to take some gains off the table and roll some of the profits into a larger number of 2013 vehicles for the ride to $450 and beyond.

    I am not surprised that the lines were short at the Verizon store. I made my Verizon iPHONE purchase yesterday on the web and it was dead easy -- you would have to be an unnecessary masochist to go to the store, especially on the first day. Albeit I am sure there were some of those out there. I guess it is also a bit of social event and something that you could talk to your friends about on Facebook and Twitter.

    I have been a Droid user since the Droid was introduced due to lack of the iPhone opportunity on Verizon. There are a lot of things to like about the Droid as an entry mobile web device. However this device is not for serious mobile phone and mobile web users. Among other things, the Droid is totally unsafe and illegal (in California) for use while driving (serious Bluetooth speech recognition and on/off alternative limitations). The second biggest gottcha is the fact that the touch screen is overly sensitive sending the phone off in many inadvertent tasks all too frequently.

    I am expecting the iPHONE to be a much better experience based on some borrowed time on iPHONEs belonging to friends. For those who are interested, I will be posting some side by side reviews in my SA Instablog starting Feb 21 after I have had some time with the new phone:

    seekingalpha.com/user/...

    I am not Walter Mossberg but I do have lots of real world Droid experience to compare to.
    Feb 10 04:26 PM | 7 Likes Like |Link to Comment
  • Will Financials Be Joining the Party Anytime Soon? [View article]
    I am amazed that anyone would recommend large too big to fail bank stocks at this point in time. Maybe some small banks that are well understood may be good investments but the rest are not. I would stay away from bank stocks like B of A, Citigroup (another Cramer lousey call) and Wells Fargo. Banks like WFC, probably this highest jeopardy of the bunch, are sitting on a pile of off balance sheet debt that contains some seriously troubled mortgage backed securitie, in this case from Wachovia. The improved earnings that they are selling to the analysts are largely fictional. They are reducing their loan reserves and transferring these to earnings while the extent of the marginal debt has not gone down. Another portion of their earnings improvement is from the government welfare they are getting -- borrow from the Fed at less than 0.5% and lend the money out at 5% on home loans, 6-8 % on auto loans and up to 30% on credit cards. Let's hope FASB is really not successful at getting all this bad debt on the balance sheet in some form or other. If they do we will have Meltdown II.
    Oct 10 12:41 PM | 7 Likes Like |Link to Comment
  • Apple: This Is Ridiculous [View article]
    Hello Ashraf,

    Thanks for the very useful write up. This is yet another value added way, no pun intended, of looking at how undervalued Apple is. Glad you are looking at things in more than one way.

    Bob
    Feb 13 11:28 AM | 6 Likes Like |Link to Comment
  • Intel's Next Catalysts [View article]
    Intel is going to be challenged to make major in roads into the tablet market for a number of reasons:

    First of all Microsoft's tablets have yet to make any significant dent in the tablet market place and the first Surface tablet had to be given away at firesale prices:

    iOS Rules The Corporate Mobile Market As Android And Windows Scrap For Second Place
    http://tcrn.ch/1eg5pNs

    Maybe most troublesome is the fact that Intel cannot count on Android market share as any guarantee of satisfactory revenue, earnings and margins. There are many reasons why this is true:

    1. Samsung, what might be considered the #1 seller of tablets, does not publish mobile device sale numbers, So Sumsung numbers can only be guessed at. They also sell a lot of mid range and low end product which does not have high revenue or high earnings. They are not going to pay big bucks for Intel chips especially when they can internally make perfectly satisfactory, low cost ARM based chips.
    2. Amazon, most likely the #2 Android tablet manufacturer, also does not publish Kindle sales nor the revenue and earnings they are making on these devices. They publically say they are selling their mobile devices at cost. So I do not see them paying big bucks for Intel chips either.
    2. In addition to Samsung there are whole lot of other tablet makers who are bombing the market with barebones low quality white box tablets selling at $99-$199. No one knows for sure but there is every reason to believe these make up a very large part of the Android market share numbers and maybe on the order of 50% of numbers published. Google does not keep track at least no publically. Obviously these guys are not candidates for Intel chips, even at giveaway pricing.
    3. That leaves the midtier like Lenovo. So far all of these folks are darkhorse minority players. This is the only wild card Intel has for making decent returns in tablets. I would not count on that.

    I worked for Intel for 20 years as a Director level manager. Intel is a great company and has done wonderful things. But now that their high margin monopoly X86 product line is no longer growing I regard them as a risky investment, at least from a growth standpoint. Mobile will never be as high a margin area as the X86 product line has been. I do not envy their predicament.

    Due disclosure: Long on Apple and QCOM and sold off all my Intel positions over a year ago.
    Dec 15 01:42 PM | 6 Likes Like |Link to Comment
  • Qualcomm May Follow Apple South As iPhone Volumes Decline In 2014 And Beyond [View article]
    I do not find Mr. Blair's articles entertaining.
    Dec 7 05:40 PM | 6 Likes Like |Link to Comment
  • Apple sells 9M new iPhones in 3 days [View news story]
    This is why the understanding of business fundamentals, the marketplace and operational methodologies are every bit as important as technical fundamentals. This did not happen just because Apple makes a better phone, it happened because of Apple's very user friendly ecosystem and business structure as well as its leading edge, high quality, high reliability mobile web devices. To this day, Apple is relatively free of time wasting malware and defective software. And if you do have a problem, you can get free responsive support in a quick and friendly manner.
    Sep 23 11:13 AM | 6 Likes Like |Link to Comment
  • September 10 May Be A Great Time To Put On An Apple Short [View article]
    Market share changes by themselves are far from the right metric for measuring success, particularly in a rapidly growing and seasonal market, and where huge market share changes occur every few quarters depending on who has the latest device in the field.

    At this moment in time smartphone market share growth is dominated by low end. Apple does not play at the low end for very good reason and probably will never play due to the permanence of those reasons. Market share changes at the high end would be a more appropriate measure but are still complicated by the market growth factor, product introduction cycles and seasonality.

    Since successful investment strategies normally include who is making the most money and in particular earnings, market share growth, by itself, is a misleading at best metric. I know it seems to be the popular thing to do but popularity does not make it right in making a successful investment decision.

    The more appropriate measures in this case are total sales sales volume and revenue growth with earnings growth obviously a big added plus. Follow the money, not the unit volume vs. others or market share. That is off the mark. Even with reduced market share, Apple is still taking home more revenues and earnings than anyone else in the smartphone, tablet or PC market.

    Yes Apple has had what is like to be small temporary shrinkage in earnings on q-q basis but that can be attributed the fact that they are currently in product transition mode on all of their key products. With new software and a fully new product line up coming over the next six months, including a likely mid range iPhone, I do not think shorting Apple anytime soon is a very good idea.

    No matter how you slice it shorting Apple on Sept 10 is a very risky strategy but if you are going to do at least use the best metrics for making your decision. If you want to make the decision ignoring the full set of facts, fine, your loss. But I would not recommend it to others.
    Aug 14 04:08 PM | 6 Likes Like |Link to Comment
  • Tesla: Be Ready For A Massive Crash [View article]
    If you want to ding a stock that has had a huge increase in short interest, take a look at your favorite stock, Intel:

    http://seekingalpha.co...

    Let's see now, you have published many bullish articles on Intel and told the world to short ARM, the undiminshed most successful provider of microprocessor designs for mobile. Then there was buy Broadcom that has failed miserably to ride the boom in two of its core product areas: mobile and streaming video.

    Now you are screaming sell Tesla, the most successful electric vehicle company in the world that is leaving conventional automobile manufacturers who are trying to do EV production in the dust. Tesla has already captured 5% of the luxury vehicle market in the US while Intel has yet to break out of its 1% participation in the mobile microprocessor market.

    Hello!
    Aug 12 10:45 AM | 6 Likes Like |Link to Comment
  • Intel: Responding To Piper Jaffray's Downgrade [View article]
    We are talking mobile web devices and not PC's. The MAC usage of Intel X86 is well known.

    I should also not have to explain what a major design win is but for the folks who may be challenged by this topic, a major design win is one that is strategic, leads to major market share gains and in the best case, high relative product sales volume. The latter being defined by much more than 2% market share.
    Jul 3 12:20 PM | 6 Likes Like |Link to Comment
  • Has Samsung Dethroned Apple? [View article]
    If Samsung, aka copy cat Sumdung, listed on the New York or NASDAQ stock exchange they would be subjected to more stringent accounting and reporting requirements. There is a reason that Samsung prefers to traded as a pink sheet stock. That should tell you something about company ethics and transparency.
    Mar 10 05:49 PM | 6 Likes Like |Link to Comment
  • Is Apple's Secret Hedge Fund Prepping For A Dividend Boost? [View article]
    Totally agree. Why o why does the American government not allow companies to repatriate money from offshore without punishing them with high taxes, essentially double taxation since they pay taxes in the host country.

    Legislation could be written that the money would not be taxed if it were used to hire US workers, buy new eqeipment and perform R&D that kept American companies competitive, build new factories in America, provide for education of their American workforce, give university grants for relevant research etc. This would be slam dunk if the Republicans and Democrats started working together again. Isn't that what America is all about. It is not about big or small government, it is about good government sized appropriately for the need. It would also allow American corporations to do some of the things being done by state and federal government today.
    Feb 6 03:42 PM | 6 Likes Like |Link to Comment
  • Apple Is Dirt Cheap And Should Be Bought [View article]
    Richbar, You are also clueless in your projection of the the future. You are totally discounting any future products and business areas let alone current business operations.
    Feb 5 08:42 PM | 6 Likes Like |Link to Comment
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