The Curious Investor

Seven Irrational Retail Valuations

Ah great. The editors at SeekingAlpha replaced the graph with the better one. Happy investing to all!

Seven Irrational Retail Valuations

The chart above is slightly off as I've calculated current and forward P/Es based on share price from the previous year. For an updated chart, I'd suggest visiting the original post at: thecuriousinvestor.com.../

Seven Irrational Retail Valuations

wobatus,

thanks for the catch. I will have to fix this chart. I used year ago share price to calculate my current P/Es. Should have checked better.

I agree with your thoughts on BKE and in fact have been looking at it very closely.

Seven Irrational Retail Valuations

It's true. Anyone with a crystal ball would be quite well off in any market. But, my contention is that retail valuations are so askew, that there is a good chance that with a rational approach to due diligence, you'll be able to separate the best deals from the worst rather easily.

As far as retail rebounding before housing or automotive sectors, I think just because the price point is lower and because clothes are a less durable good and more "liquid" that it will be easier for consumers to buy marginal items of clothes as opposed to replace a house or a car (much less buy an additional one).

Start Looking Forward to Earnings Season

A good point indeed. Forward P/E is only as reliable as the source of the forward estimate. Truth be told, to get a good apples-to-apples number, you should develop your own methodology for cleaning an earnings number and projecting forward. That way, you know you are getting a consistently calculated earnings number.

If it wasn't obvious, I found my forward P/E numbers using Yahoo! Finance. The forward earnings number used is Yahoo's average analyst estimate for the next four quarters. I believe the source data from this is from Thomson Financial which aggregates estimates from various sell-side research.

Oil Stocks: Where Can You Find Black Gold?

I believe that working with OPEC can actually risk membership in certain trade groups. For example, Russia has had its membership to the G8 threatened as a result of its potential decisions to act with the cartel.

On Jan 10 03:20 PM Ed O in PA wrote:

> Stabilization of crude? Why not then your salary? Or the size of
> your car, house etc etc. Let free markets decide. Of course since
> OPEC is a cartel, our crude markets are not free. Perhaps we should
> figure out a way to break up the cartel. Why do you never hear talk
> about that?
>
>
>
> On Jan 09 10:23 AM Whippet wrote:

Grease Up Your Portfolio with Oil Stocks

Thanks for your comment, SeekingTruth. While the numbers on production seem shockingly low, I have a feeling they are possibly true. The higher numbers we see, for example $50/barrel for oil sands production, are typically cost of MARGINAL production numbers. However, for areas that are developed and the investment cost sunk, it's not unreasonable to believe the cost to maintain production levels is actually quite low.

For all readers, if you're interested in part 2 of this article which proposes some ways that you can add oil exposure to your portfolio without making a direct bet on oil, check out this link -thecuriousinvestor.com.../.

Oil Stocks: Where Can You Find Black Gold?

I haven't responded mostly because the discussion in this comment section doesn't really relate to my post here. My argument in this article as well as a prior article on adding oil exposure to your portfolio - thecuriousinvestor.com.../ - is not that oil prices must rise, but exposure to correlation to oil prices has a healthy diversifying effect on your portfolio.

You'll notice that I do not advocate buying an Oil ETF/ETN or an oil major straight up. I believe that refiners, exploration and production MLPs, and solars provide better risk/reward when trying to capitalize on any upward movement in oil prices. As to whether or not the long term trend in oil prices is up, down, or sideways, I'll leave that guesswork to people who know better than me. From the little I do know about oil and its use as an energy source, a fuel, and a feedstock (I was a chemical engineer by education), my guess is that there will be an upwards bias in oil prices for quite some time going forward. I don't have any reliable evidence to refute Michael66's claims, but my gut feeling is that he's a bit optimistic about how soon methyl hydrate, bio diesel, nuclear, and other technologies will displace oil. Furthermore, he neglects that none of these addresses the use of oil as a feedstock for polymers.

30 Stocks Worth Investigating for 2009

A very interesting list. Is it possible for you to explain the methodology used to assess expected sales growth and the value score?

How Are Banks Spending Bailout Money? Anyone's Guess

I have to agree with some of the other comments here. Dollar for dollar accounting is not the best way to keep track of the effectiveness of the money borrowed under the TARP. The money wasn't just given out to be spent. It is used to establish liquidity for the banks to propagate the functioning of our capital markets. I think the fact that we see 3-month LIBOR falling from 4.6% to 1.4% over the last few months is a very good sign that the TARP money is being put to use in a constructive manner. The real key is whether or not the banks, now that they have a capital cushion, are building stronger, less risky operations.

Valero: Too Good to Be True?

I was recently contacted by a Mr. Ashley Smith of Valero's Investor Relations and I think it's important for me to make a clarification. The "listing price" that I used for the Valero Aruba facility is based on estimates that I found on another blog post - epiphanyinvesting.com/.../. The $1.25 billion that I use in my analysis has not been corroborated by Valero which has never provided such information about the Aruba facility.

Let me reiterate that the analysis here is meant to be conservative and provide directional guidance. It is not an exacting valuation of the company and I provide it to share my thoughts and maybe help others to learn about the investing process.

My personal goal with these types analysis is simply to establish a baseline valuation with which to establish out MY buy and sell targets. Readers looking to make an investment should definitely do their own due diligence.

What's Happening at Apple: Steve Jobs

Tom B,

I agree completely with your view that Apple needs "critical mass" in order to continue to grow and take market share both in the consumer and enterprise market. In fact, I believe I make that contention in the next part of this post series when I discuss potential successors to the Apple CEO position. In fact, I believe the Company is so well positioned today as far as reaching a "critical mass" of consumer users (and this is really their focus, not enterprise software) that, even without a visionary presence at the firm directing future strategic initiatives, any decent executive could manage the Company's product lines effectively enough to be profitable for a considerable period of time going forward. Hence, the argument for someone like Timothy Cook over Joni Ive.

All this aside, I think we can agree that Bill Gates was a driving force strategically at Microsoft and steered the Company to a very defensible business segment (enterprise software) that continues to be the source of its strengths today. Now, Microsoft is struggling to defend its enterprise business and at the same time identify new business areas to grow into.

Steve Jobs has similarly steered Apple to success over the last ten years and created a defensible position by establishing the Company's reputation for innovation and style. These strengths, unfortunately, are much harder to defend than enterprise. As you describe yourself, enterprise needs are easy to target. Consumer purchasing decisions are much more difficult. Just look at Crocs, for example. What's hot today may not be hot tomorrow.

Given that Apple's success has come only during periods of time that Steve Jobs has been providing the motivating direction at the firm, how can we as investors feel comfortable about Apple's ability to defend its business going forward?

I realize that Crocs isn't the best comp with Apple. But, Apple is as much a retailer as it is a tech business. And, it will continue to be more a retailer until it truly reaches critical mass within the consumer market and can capitalize on the network characteristics of inherent in its products (the key difference between making trendy apparel and making aspirational personal computing products). These days, as I contend in this post series, Apple's products are more just luxury substitutes for generally available computing products - a mobile computer, a personal computer, a personal media player.

Once again, I realize that Apple is not simply a company that puts a pretty package on Apple has the benefit of not just making personal computing products. It also controls proprietary file types, operating systems, and other software that go into the whole user experience which differentiates its products from the rest of the pack. This allows them an advantage over a plain-jane retailer like Crocs or maybe more appropriately HTC, a maker of very cool cell phones, mobile computers, and portable media devices. Apple's advantage is that theoretically they should be able to use their proprietary systems to lock-in their user base both through the establishment of a critical mass (network characteristics of tech products) and through individual consumer dependence on multiple products.

It's hard to say how successful Apple has been on this part of their business. In the end, iPod and iTunes usage didn't explode until after it was released for PC. Apple eventually released Safari for PC as well. The so-called "halo effect" everyone predicted since 2005 did not really appear until the last two years. There is, however, serious evidence that users are starting to finally buy into the whole Apple experience, not just individual products. Mac sales have outpaced broader PC sales. Safari browser share continues to climb. And, the iPhone is all but synonymous with the mobile computing market. This is why I continue to hold my stake in Apple, but cast a wary eye on anything that could potential derail execution of a strategy which will extend and strengthen the Company's competitive advantages including the potential loss of one of the most innovative and influential executives in the last twenty years.

What's Happening at Apple: Who Could Replace Steve Jobs?

Timbo,

I just realized that the link you posted was published on the 20th at 10:30am. The original version of my article was posted on the 19th and was delayed in its posting on Seeking Alpha because I've only recently become a member.

What's Happening at Apple: Steve Jobs

Sleepyg,
Maybe I made a semantic mistake in choosing to describe the community of Apple users as "adoring fans" of Steve Jobs. My point is basically that up until now, it's hard not to deny that Apple Fandom has been tied to the Steve Jobs as Chief Executive at Apple. There are few brands in the world that have a regular online following, multiple high-traffic rumor blogs, and a tradeshow circuit devoted entirely to their products and peripherals made for their products. This is most definitely the result of terrific execution and a tremendous foresight. I believe that Apple will survive beyond Steve Jobs, but I do think that it needs to (and has begun to) transition away from its reliance on "Steve Jobs (tm)" as its iconic salesman.

Arnold,
I do mention the WWDC and Apple Special Events in this post. Maybe you thought I should have made a stronger point on their viewership?

TimboM,
I agree and I think most investors agree with your point. The stock fell 7% but has rebounded quickly and is really trading roughly flat with prices pre-announcement. A lot of negative sentiment is baked in and Apple is in a perfect place to wow us with a tremendous set of product announcements and a healthy Steve Jobs appearance. But, inherent in the fact that they "gave away almost no information" is the fact that the information they did give away

Tom B.,
Microsoft continues to deliver strong earnings and revenue results despite perceived flubs in marketing and product development. Microsoft's bread and butter remains its entrenched enterprise software business for which the foundation was laid during the Bill Gates era. It's future success will ultimately be determined by how well it captures consumer and internet market share, but I think it's a bit early to judge this or to tie recent failures directly to the loss of Bill Gates.

Also, if you do think that Bill Gates leaving Microsoft resulted in its fall from grace, then it doesn't really help your contention that Apple will continue to thrive regardless of having Steve Jobs' as Chief Executive. Steve Jobs has been taking a slightly lesser role (at least publicly) for the last year or so (i.e. inviting other executives to speak for him at engagements and even on earnings calls) and will probably continue to transition away in coming years. How can this not be at least a minimal concern to a long-term investor?

What's Happening at Apple: Who Could Replace Steve Jobs?

TimboB,
My main focus on this article was to provide my own ranking of the people that many, many blogs, magazines, and newspapers have been throwing around as potential Jobs successors. I did provide links to some source information and, to tell the truth, most of the little snippets on each candidate are pretty much just simple bios. I don't know how creative I could have been on that kind of background information. In the future, I'll try to cite sources more accurately for you.

PK,
I think Fadell is very interesting choice and would not mind entrusting the company to the hands of a guy who is clearly experienced in both coming up with a game changing idea (iPod), selling it (getting Apple to bite), and executing it (leading hardware development for the iPod and iPhone). That seems like a winning combination of skills to me.

Buffeted,
I think the goal of my last three posts on Apple were definitely slanted towards the idea that what we are seeing is a shift in perception from "Apple brought to you by Steve Jobs (tm)" to "Apple, the standalone Company". And, more importantly, that this is not a bad thing. In fact, I do recommend the stock at these prices at the end of the piece and I am long Apple myself. But, generally, I like to cast a conservative eye on any stock that I own. I think that a more successful way for Apple to manage such a transition is to be more transparent about the plans of its senior management, at least until public perception changes from a focus on its senior management to a focus on just the Company and its product offerings.