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The Ethical Investor  

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  • 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, 2010. 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, 2010. 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, 2010. 11:38 AM | 1 Like Like |Link to Comment
  • Microsoft: 15% Upside Potential With Low Risk [View article]
    Its funny u say that. Yesterday, i was about to compare AAPL and MSFT in this article. Then I decided against it as there is little in common between the companies. In fact, my next article will deal with AAPL valuation.
    Sep 21, 2010. 03:25 PM | 1 Like Like |Link to Comment
  • Microsoft: 15% Upside Potential With Low Risk [View article]
    "FBR Capital analyst David Hilal today reduced his 2010 PC unit growth estimate to 16%, from 20%." That is still not bad considering that I have assumed a 7% growth rate.

    Further David continues to believe "that strong PC refresh cycle will play out through CY11 as enterprises need to replace their aging fleet of PCs."

    I dont see a doomsday for MSFT anytime soon. If you tell me that they wont grow as fast as they did in the 90s and early 2000s, then yes, I will agree. The way I look at it, MSFT has transitioned from a growth company to a value company.
    Sep 21, 2010. 02:54 PM | 1 Like Like |Link to Comment
  • Microsoft: 15% Upside Potential With Low Risk [View article]
    I agree with you. Multiples from earlier in the decade have little meaning today, which is why my multiple of 13 is based on the average of the last 3 years. From 2001 to 2007, the avg P/E for MSFT was approximately 31.

    During the last 3 yrs, MSFT routinely traded at multiples of 15-19. Considering that net income grew by 7% during the last 3 yrs (same as my projected future growth rate), I consider my price target of $29 (based on P/E 13) as a fairly easy price target for MSFT to attain.
    Sep 21, 2010. 01:23 PM | 2 Likes Like |Link to Comment
  • Who Is the Next Microsoft? [View article]
    What about a 3rd option? Neither!
    Sep 17, 2010. 03:56 PM | Likes Like |Link to Comment
  • Who Is the Next Microsoft? [View article]
    "and this time, I'm not letting the opportunity pass me by."

    Does that mean that you will be opening a position in the next few days? If so, what is your target entry price?
    Sep 15, 2010. 04:31 PM | Likes Like |Link to Comment
  • Evaluating Colgate-Palmolive [View article]
    I completely agree with you. I am just not comfortable with valuing companies assuming that they would grow their bottom line at twice the rate of their top line over an extended period of time. At the very least, I would assume that the company's operating margin would be in line with the sector's operating margin. Additionally, for a company as big and as mature as CL is, I would prefer a two-stage growth with the high growth period not lasting more than 5 years. In the case of CL, i would probably assume that the company would grow by 8% for the 1st 5 years and then grow by 4% into perpetuity.
    As you would probably agree, valuation is an art more than science and everyone has their own way of doing things. Kindly note that my comments above were strictly based on the information provided in this article. I have a fairly positive view of CL and I plan on adding it to my dividend portfolio.
    Sep 13, 2010. 05:22 PM | 1 Like Like |Link to Comment
  • Evaluating Colgate-Palmolive [View article]
    Let me play devil's advocate for a moment. A company growing its revenue at 4% cannot sustain an EPS growth of 10% or even 8% over an extended period of time. The EPS growth is probably the result of better operational efficiencies. They cannot indefinitely improve their operations. Once this happens, the EPS growth and revenue growth should be fairly similar. Therefore, a better way to analyze CL would be to assume an EPS 4% growth rate to match the revenue. EPS 2019 = 4.3*1.04^10 = 6.36


    Additionally, your table indicates P/E compression over the last 10-15 yrs. I would want to look at this trend a predict a P/E 10-15 yrs in the future. Based on the data you provided, it is easy to expect a 25-30% reduction in future P/E resulting in a P/E between 12 and 13.

    CL price = 12*6.36 = $77 or 13*6.36 = $83
    Sep 13, 2010. 04:31 PM | 2 Likes Like |Link to Comment
  • Hansen Natural: Quenching Thirst With Record Profits [View article]
    Alex, good catch. I am a little embarrassed that I dint know about this product. I will surely read about.

    On a side note, the valuation of HANS seems to be getting richer by the day. My price target of 54 was under the implicit assumption that the broader market would also appreciate in value. I might have to reevaluate HANS shortly to see if it makes sense to take some profits at this new 52 week high.
    Sep 8, 2010. 12:27 AM | Likes Like |Link to Comment
  • 3 Overlooked Value Investment Ideas [View article]
    Why would you assume an EPS of 0.43? The consensus is around 0.12.
    Aug 30, 2010. 11:27 PM | Likes Like |Link to Comment
  • BP's Gift to Investors: Cheap Energy Stocks [View article]
    I am not so sure about DO at the moment. They have, by far, the oldest fleet among the deepwater drillers. Management in the past had a policy of returning excess cash back to the shareholders as special dividends partly due to the pressure from Lowes which owns a ton of DO stock. I think using the money for upgrading the fleet would have been a better use of the cash.

    Disclosure: Long DO
    Aug 17, 2010. 01:32 PM | 2 Likes Like |Link to Comment
  • Hansen Natural: Quenching Thirst With Record Profits [View article]
    Chances are HANS will eventually be bought by KO especially since sales of Full Throttle are falling off the cliff. But I agree, over dependence on one brand is a big weakness. This is offset by the fact that the Monster brand has significant room to grow in the European, Middle Eastern and Australian markets. Plus, the company is trying to develop a good non-energy drink portfolio and the results are mixed in my opinion. The coffee business is still not there where I want it to be and the tea business is in its infancy.

    Alex, I did attend the conference call. The company did not talk too much about non-energy drink products. The monster brand will continue to be the major growth driver for the next few years. The tea segment, for example, is more like an add-on.
    Aug 10, 2010. 12:44 PM | Likes Like |Link to Comment
  • Diamond Offshore and Noble Corp: Drilling Profits [View article]
    Thanks huber.

    Unfortunately, I was not following those companies during the time period you mentioned. So I can only venture a guess. There can be several reasons for this outperformance.

    As you can see, the DO's earnings shot up from 2003 to 2006. The expectation for future growth was probably responsible for the price differential.
    Aug 11, 2009. 06:28 AM | Likes Like |Link to Comment
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