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Digital Displacement, Patience, And Next Week's Agenda-

It was a very eventful week in the stock market last week, as investors started with gloomy news from France and the Netherlands with respect to their political results. On Tuesday, Apple crushed it, and on Thursday, a slew of companies reported, including Starbucks and Amazon.com. The market viewed Amazon's results very favorably, not so for Starbucks. Interesting interpretation, and in time it will be interesting to see how those companies fare. I would imagine both will do very well, as both are strongly positioned to benefit from the growth in the global digital economy.

In looking at the displacement by digital goods against off line competitors, I recently was talking to my brother about whether or not satellite and cable companies are going to be losing customers. He believes they will, and I have changed my mind and come around to thinking he is correct. The key is to have content which is unique, and can be distributed by the owner in any number of ways. Controlling the distribution method now means little when you can go straight to the internet or a mobile device and download it directly. It won't happen overnight, but three years from now you could see a vastly different picture about how people consume content, with most of it probably directly from the provider.

One thing which I really enjoy as an investor is sticking with companies when they have subpar or mediocre performance, and even adding to the position. In many instances, it takes a few years of sticking with the company, but when performance turns around, you really benefit from your patience. It is not easy to do, however, what can really help is when you get a nice dividend so you get paid to wait. An existing situation like that would be Johnson and Johnson, BP, or HP- full disclosure, I own them all. All recently raised their dividends, and if they start to grow just a little bit quicker, well, lets just see what happens.

There are going to be a slew of earnings reports this week, so I look forward to seeing how the market digests them. Lots of media and technology companies report, or at least a number of those that we own. Here is a nice story on how the Gap is reinventing itself-http://www.nytimes.com/2012/04/29/business/a-humbled-gap-tries-a-fresh-coat-of-pep.html?_r=1&ref=business

April 2012 was a tough month for the stock market industry as investors fled in droves-http://www.bloomberg.com/news/2012-04-27/equity-fund-redemptions-in-april-are-largest-in-17-years.html

Looks like the entire venture capital industry is facing a bout of Schumpter's Creative Destruction (about time)-http://techcrunch.com/2012/04/28/the-seven-forces-disrupting-venture-capital/

Y H & C Investments, Yale Bock, and the family of Yale Bock own positions in securities mentioned in the blog post. Investing in stocks can lead to the complete loss of your capital.
As always, on any company mentioned here, past performance is not a guarantee of future returns. Investing involves risk of losses on invested capital. One should research any investment and make sure it is suitable with your objectives, risk tolerance, risk profile liquidity considerations, tax situation, and anything else pertinent to your financial situation. Also, the CFA credential in no way implies investment returns will be superior for any charterholder.

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Disclosure: I am long BP, SBUX, HPQ, JNJ.