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Stephen Rosenman
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I enjoy analyzing the financial health of companies and pointing out areas the market is either not recognizing or ignoring. A long time investor, I put my money where my mouth is. That's why I'm passionate about my positions. I trumpet companies I believe in and back my articles up with data... More
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  • My Apple Eureka Moment: Notebooks Can't Fall Into The Toilet, Cell Phones Can.
      As I watched Apple's stock price go into the toilet today, I felt paralyzed. Could things be this bad?  

      And then, my wife dropped her cell phone into the toilet.  I don't mean to complain, but come on.   I didn't scream.  I've been married too long; I know better. Rather, I had a eureka moment: notebooks can't fall into the toilet, cell phones can.
    Everything has a life: notebooks, cell phones, media players, desk tops.  Nobody gets out of here alive including all those gizmos.  Some people can keep their notebooks a long time; my daughter's kept hers going for 6 years!  Our desktop is 8 years old (should I name it? who wants to get attached?).  But nobody, and I mean nobody, keeps their cell going for that long.  Two years tops, if you go by my family.  
      Which brings me to the point of the piece. Cells have short lives. In the past, the cell drowns and you go and buy whatever's on sale, any dumb phone will do. This time, the brief life of the cell plays into the hands of the smart phone manufacturers.  For the first time,  brand addiction is going to be the driving factor.  The iPhone, like other Apple products, has a horde of loyal followers, somewhere north of 30 million.  Unlike the notebook and desktop, the product cycle is short. With a device, estimated to have gross margins of 60%, the implications are extraordinary.  In the past, cell phone users  bought what was available because their was little to differentiate the product.  Now, when the inevitable happens, expect iPhone users to reup.  
       Analysts and pundits all talk about expanding markets for the iPhone: China, South America, Asia.  However, no one talks about the extraordinarily short lifespan of the cell, something that will keep a huge base of sales going for many years to come.  It is the big story for Apple.  Bigger than nonGAAP sales going GAAP.  Bigger than the iPad.  Bigger than China. IPhones have been out fewer than 3 years. Those 30 million plus owners  are likely to replace theirs in what will seem a financial blink of an eye.  This is going to be the biggest driver of Apple's earnings: a high margin high priced product that must be purchased at least every 3 years.

    Disclosure: long AAPL
    Tags: AAPL, BBRY
    Jan 29 4:31 PM | Link | 1 Comment
  • Alcoa's Aluminum Penny
      Alcoa came in at nonGAAP $0.01, five cents worse than expected.   Disappointing to say the least.  Especially when whisper numbers were as high as $0.10. (  But who cares about the past.  The real question is where will earnings be in the future?

     Rather than delve into AA's report to figure out where earnings will be in another 6 months,  it's simpler to look at aluminum LME stores.  Aluminum stores are almost 5 times what they were 5 years ago. Yet, aluminum pricing is largely the same as 5 years ago, a seeming disconnect from reality. With aluminum in glut mode, you've got to wonder where AA's next penny will come from.


    Disclosure: no position
    Tags: AA
    Jan 11 6:33 PM | Link | Comment!
  • Less Speculative Stocks Are Showing Signs of Outperformance (NVR, HOC, WMT, ANN, HCBK, BAC)
        Since the bottom in March 2009, some stocks have seen tremendous outperformance. I referred to it as the sling shot phenomenon in a previous post: the harder a stock has fallen, the bigger its rebound.   (;  The biggest winners were often the most speculative ones, companies whose survival appeared very much in doubt.  They frequently had weak margins, profits, and balance sheets.  In contrast, the seemingly stronger players lagged.  As we enter 2010, this pattern is starting to break down.
         Compare the pairs below.  For years,  NVR, WMT, and HCBK clobbered the paired HOV, ANN, and BAC.  HOV, ANN, and BAC were trounced so badly that they all traded under $3 in the early part of the year. In March, they came back from the dead and left NVR, WMT, and HCBK in the dust.  We've only recently resumed the older pattern in which the stronger of the pairs outdistanced the weaker, something that will likely continue into 2010.  If you follow the "green" line, it as though HOV, ANN, and BAC's spectacular outperformance never happened. 


    Disclosure: No positions
    Jan 01 7:54 PM | Link | Comment!
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