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The Ethical Investor

 
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  • Analyzing Major Big Pharma Players Using Relative Valuation [View article]
    Good question actually. Well, the pipeline was considered while shortlisting the companies. I also looked at patent expirations. Please note that RV is the 1st stage of my analysis, which is why I did not provide a price target as I usually do in my articles. I plan on performing discounted cash flow analysis which will dwell deeper into the pipelines, patent expirations, product mix, and R&D expenses.
    Oct 18 11:16 AM | Likes Like |Link to Comment
  • Analyzing Major Big Pharma Players Using Relative Valuation [View article]
    Its 5 year data with more weighting for the last 3 years
    Oct 18 11:13 AM | Likes Like |Link to Comment
  • Intel: Trading at a Discount [View article]
    S&P 500 was at 1175 in 2001, where is it today?
    Oct 14 09:23 PM | 3 Likes Like |Link to Comment
  • Why Microsoft Should Buy Research In Motion [View article]
    If MSFT ever tried to acquire RIMM, I am positive that deal wont be for anything less than 100% premium. RIMM currently has abt $2 Billion in cash. In unlikely scenario that a deal does go through, it will be in excess of $50 Billion. MSFT will probably have to resort to issuing new debt and risk its AAA rating.
    Oct 7 06:20 PM | 5 Likes Like |Link to Comment
  • Cisco: Almost a Compelling Buy [View article]
    Which is why, for a firm as big as Cisco or MSFT for that matter, i like buying them at low prices and flipping them in the next 12 to 18 months. I dont believe any of these companies make great additions to my long term portfolio. In the short term however, it is possible to profit from the mis-pricing of Mr Market

    Dell, i havent looked at closely. I will hopefully research that company and perform a valuation analysis in the upcoming days.
    Oct 6 06:36 PM | 1 Like Like |Link to Comment
  • Cisco: Almost a Compelling Buy [View article]
    The share count has dropped from 7.2 Billion to 5.6 Billion. Thats a terrible drop in my opinion. Your point is well taken. I have never been a fan of stock buybacks as a way of paying the investors. This is especially true with mature companies. Let me have the money and spend it the way I want.
    Oct 6 06:14 PM | 1 Like Like |Link to Comment
  • Going Defensive With Johnson & Johnson [View article]
    Another point I would like to make about R&D expenses. Going by theory, by expensing R&D, you are implying that R&D spending only provides benefit during the current period. However, usually thats not the case. Most companies to the contrary derive benefits from R&D spending in future years.

    On the other hand, capital expenditures are expenses which typically provide benefits over multiple time periods. For companies such as biotech and technology firms which do not really require lot of conventional capex, the R&D expense is the only way they can fund their future growth and operations (organically of course).

    Therefore, regardless of the impact on operating income, for companies with significant R&D expenses, I believe that capitalizing them is the right thing to do.
    Oct 6 05:57 PM | 2 Likes Like |Link to Comment
  • Going Defensive With Johnson & Johnson [View article]
    This what happens if you try to post a quick reply while being extremely busy at work. You are right, capitalizing R&D adds to the assets on the balance sheet. The net effect on operating income depends on whether the amortization of the research asset is greater than the R&D expense in the current year.

    For high growth firms, typically the R&D expense is greater than the amortization leading to an increase in operating income. but for mature firms, with relatively stable R&D expense, the operating income can actually decrease. Such is the case with JNJ. Without capitalizing the R&D expense, the value of JNJ stock increases.
    Oct 6 11:30 AM | 5 Likes Like |Link to Comment
  • Going Defensive With Johnson & Johnson [View article]
    Capitalizing them actually reduces the net value. By capitalizing them, I am treating the R&D as capex which would therefore reduce the FCF.
    Oct 6 10:43 AM | 4 Likes Like |Link to Comment
  • Offshore Drilling: Analyzing Major Players Using Relative Valuation [View article]
    My estimates are not based on simple averages. For starters, I clean the data set for outliers. Then, I use a variety of statistical techniques (depending on the particular case) to come up with the estimates.
    Oct 3 01:33 PM | Likes Like |Link to Comment
  • Offshore Drilling: Analyzing Major Players Using Relative Valuation [View article]
    I use several spreadsheets for my analysis. Most of these are interlinked. But, it is not as simple as plugging numbers. According to me, plugging numbers is akin to "garbage in, garbage out" . I like getting the feel of every step of the process to see if the numbers and calculations make sense.
    Oct 3 01:31 PM | 3 Likes Like |Link to Comment
  • Offshore Drilling: Analyzing Major Players Using Relative Valuation [View article]
    The utilization data and fleet size was obtained from rigzone.com. It was mentioned in my instablog, but for some reason, it did not appear in the published article.
    Oct 1 05:03 PM | 2 Likes Like |Link to Comment
  • Battle of the Titans: Google vs. Apple [View article]
    I think thats a fair argument considering that AAPL's long term investments are in treasuries and corporate bonds. Updating my analysis results, the fair value of apple (avg of DCF and RV) increases to $330 which is coincidentally my 12-month price target.
    Sep 27 12:20 PM | Likes Like |Link to Comment
  • Battle of the Titans: Google vs. Apple [View article]
    Actually, it implies a growth rate of closer to 18% in line with other analysts. And yes, I have been hiding under a rock. If I wasnt, i would have bought AAPL when it was trading at 90 3 yrs ago.
    Sep 24 08:50 PM | Likes Like |Link to Comment
  • Battle of the Titans: Google vs. Apple [View article]
    I apologize. Its a typo. It should read $24,288. However, it does not change the valuation results in a meaningful way.
    Sep 24 11:38 AM | 1 Like Like |Link to Comment
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