I have done some comparison work on Veeco Instruments (VECO) and Cree (CREE) (two leading LED plays). While CREE is great, the results suggest VECO has a LOT more upside potential from here.

• CREE has a market cap of $4.6 billion. This is 5x the June 2011 revenue estimate of $910 million. Revenue is expected to grow 22% next year. The June 2011 EPS estimate is $1.43…so the stock is trading at 31x earnings.
• VECO has a market cap of $800 million. This is just 1.5x the revenue estimate for next year (compared to 5x revenues for CREE). Revenues are expected to grow 45% next year (far higher than the 22% for CREE). If VECO were to trade at 5x revenues like CREE…the stock would be $80 per share. VECO EPS are expected to be $1.25 next year, so the PE is 19.6. If VECO were to trade at the same PE as CREE…the stock would trade at $39 (+60% from here).
• Comparing the valuations of CREE and VECO gives me a potential upside target for VECO of $50 next year…maybe more if they continue to beat estimates by such a wide margin.

Disclosure: Long VECO.

Love him or hate him, you have to admit that Apple CEO Steve Jobs has had a helluva decade.

Consider that, under his helm, Apple (AAPL) defined the portable music player market with the iPod, has shaken up the mobile industry with the iPhone, rocked the retail music business with iTunes and re-invented the computing business with OS X in a way that the PC business - with less than 10 percent of market share - is no longer the bread-and-butter of the company.

If you are a tech lover, there is nothing quite like the launch day of a much hyped new gadget. Expectations run high. And since those expectations are rarely satisfied once you have the special little device in hand, it’s a moment to savor. In the hours before you own it, that device is perfect in every way. It will make you happier, a better person. There are no bugs, there are only features. It is whatever you want it to be.

Launch day of a new cool gadget is the closest thing to being a kid again on Christmas day (or whatever your winter solstice holiday of choice). You’ve anticipated the day. You’ve called in sick to work. And you are standing out in the freezing cold at 7 in the morning, hoping your place in line assures you a device before the carefully-planned sell out occurs. You’ve worked yourself into…a Fever Pitch.

October ended last Saturday October 31, 2009. As many people analyze the performance of securities for the month, I’d like to look at sentiment and change in sentiment for the top comeback securities. Comeback securities represent companies that recently got into financial trouble or met new competitive challenges that dramatically reduced their market cap. These companies are now trying to regain their market strength and valuations.

Sentiment is a measure of how people feel a stock will perform and is captured by a voting mechanism that indicates a strong buy, buy, neutral, sell, and strong sell. The value of sentiment is based on the ‘Wisdom of Crowds’ where the many will in most cases make better decisions than the individual. Higher sentiment stocks are considered higher quality stocks, while lower sentiment stocks are considered lower quality stocks.

Back on December 5, 2007 I sent the following note to investors (economictiming.com):

The rate of change of economic data is worsening so it’s time to short the following group of downside leadership: Financial Sector SPDR (XLF) at $30.60, MGIC Investment Corp (MTG) at $23.75, Amabac (ABK) at $23.70, Countrywide Financial at $10.45, Freddie Mac (FRE) at $33.30, Beazer Homes (BZH) at $8.13, PMI Group (PMI) at $12.65, and Citigroup (C) at $33.40.

ETF Market Direction Summary: 11-05-2009

From the opening on Thursday, major U.S. equity indexes started the day on positive momentum and continually added to their intraday gains to close above the 90th percentile of their daily trading range.The DIA, SPY, and QQQQ have ended their corrections and re-established their support levels at the 20, 50, and 200 day moving averages. The only exception is the small-cap IWM which remains in both short and intermediate downtrends. However, the IWM did manage to participate in attaining a new 5 day high along with the other major equity indices.

Fortune Magazine has named Apple (AAPL) CEO Steve Jobs as “CEO of the Decade”. There is no denying the fact that Apple has delivered for shareholders over the past decade. As the Fortune article states, Apple’s market capitalization has risen from $5 billion in 2000 to approximately $170 billion today. This has been due to Jobs’ ability to create a culture of innovation at Apple that has resulted in groundbreaking new technologies such as the iPod and iPhone, not to mention the company’s widely acclaimed personal computers.

Garmin Ltd. (GRMN) reported third quarter earnings that beat the Zacks Consensus Estimate by 32 cents. Fully diluted pro forma earnings per share (EPS) were $1.01, compared to 83 cents in the June quarter and 88 cents in the comparable prior-year quarter. The pro forma number excludes a foreign currency gain in the last quarter.

Revenue

On top of that, the company said if you eliminated subscription accounting metrics, the numbers looked even better.

On the other side of the street is Research in Motion (RIMM), whose management has been a bit more blunt in the market challenges they face. Then, zooming in from nowhere comes Motorola’s (MOT) ‘Droid, adding yet another fishing pole to the smart-phone pond. (Click chart to enlarge)

First Consideration: there is no substitute for GAAP accounting rules. You can “adjust” earnings, sales, costs, margins, etc. all you want, but “pro forma” is simply a way for a company to show what they think the numbers should be. Thus, Apple has supplied investors with a second set of books.

When Nintendo first introduced the Wii in 2006, they did so with a lower price point than the competition and a focus on capturing interest from all demographics. Demand for the Wii was so high that finding a Wii in a store was a rarity until earlier this year. Since then, Nintendo has dominated in sales of consoles leaving both the Sony Playstation 3 (PS3) and the Microsoft Xbox360 in the dust. In August, both Sony (SNE) and Microsoft (MSFT) lowered the price of their consoles to $300, but the PS3 came out victorious in September with monthly console sales surpassing Wii for the first time. Interestingly, Nintendo retaliated and lowered the price of the Wii to $200 in September.

Imation (IMN) is a consumer-focused technology firm with leading market share in removable storage products, such as recordable DVDs. The company has a strong balance sheet and owns the widely recognized Imation and Memorex brand names. Trading well below book value and in line with “net net” working capital, the shares strike us as simply too cheap to ignore.

Company Description and Thesis

As the market has risen throughout most of this year, many market observers have noted that P/E values are looking rather inflated from a historical standpoint. But of course, earnings are lower than usual this year due to reduced revenue that was caused by financial shocks. So as investors, should we be willing to pay a higher P/E for now, on the assumption that earnings will soon pick up?

When considering the market in the aggregate, this is a very difficult question to answer. Some companies will have cost structures that prove too rigid, and will therefore be unable to adapt to a lower revenue environment. Other companies, on the other hand, will have flexible cost structures or will see revenue continue to grow, despite the downturn. But to determine which of these forces will exert more pull on the market's earnings in the coming quarters is not only extremely difficult, but unnecessary: Unless you're trying to value the entire index, you don't have to answer this question for the market in the aggregate. Instead, you can try to answer this question for individual securities, which are much easier to understand.

ETF Market Direction Summary: 11-04-2009

Wednesday’s comments will be brief. As expected, the Fed Reserve left interest rates unchanged and reiterated its policy to keep interest rates near zero. It also emphasized for the first time that rates will remain near zero if inflation expectations are stable and unemployment remains high. The market responded with volatility and ceded most of its gains and the U.S. dollar weakened as well.

By John Biggs

For those of you who took an economics course at some point in your lives, I am happy to report "price elasticity" is still alive and kicking. It appears the $1000 price point for Apple's (AAPL) iPhone is a bit of an issue for the "middle class" of China, and this is for a phone without a service contract!

• The price tag for a 32GB iPhone 3GS in mainland China: 6,999 yuan, or $1,024, which doesn't include the service contract.

This data will surely strike at the hearts of those who use 1st grade logic... "1.3 billion Chinese x 2 iPhones per household = nirvana".

The month of October ended last Saturday. As many people analyze the performance of securities for the month, I’d like to look at sentiment and change in sentiment for the technology sector.

Sentiment is a measure of how people feel a stock will perform and is captured by a voting mechanism that indicates a strong buy, buy, neutral, sell, and strong sell. The value of sentiment is based on the ‘Wisdom of Crowds’ where the many will in most cases make better decisions than the individual. Higher sentiment stocks are considered higher quality stocks, while lower sentiment stocks are considered lower quality stocks.

ETF Market Direction Summary: 11-03-2009

Bulls took advantage of dollar weakness and bought stocks in earnest to support the S&P 500 in its 2nd consecutive day of positive performance. Initially, stocks traded lower as the U.S. dollar continued to advance, but a surge in precious metals buying sent spot gold prices to a new 52 week high and forced the greenback to retreat and settle for a small positive close in the lower end of its daily trading range. A $6.7bn purchase of 200 tonnes of gold from the IMF by India’s Reserve Bank was responsible for this explosive move.