A picture is worth a thousand words and so is Figure 1. Figures 2 is good too. The inescapable truth behind Apple's (AAPL) valuation is that market expectations are way too high.

Apple's ROIC Is An Ephemeral Aberration

This article provides some empirical evidence behind my putting Apple (AAPL) in the Danger Zone last week because its return on invested capital (ROIC) is outrageously high. That fact underscores why valuing this company or any other with the expectation that such a high ROIC was sustainable would be a mistake.

Figure 1 plots the market value of the top 1500 companies by market cap that I cover against ROIC. This figure illustrates just how far out there APPL's ROIC is. It also illustrates the expected impact on the stock's market value when the ROIC comes back to earth.

Betting on Apple's ROIC continuing to be an outlier is

I believe that I may have severely underestimated the fragility of ARM's (ARMH) share price in the face of potential design win loss to Intel's (INTC) chips. In just a couple of days, shares of ARM Holdings have crashed from $50.56 to the most recent close of $45.82 following ARM's recent investor meeting. Morgan Stanley (MS) recommending shorting the shares on almost exactly the same reasons that have fueled my thesis (valuation, Intel threat, ASP erosion in smartphone space, etc.), which may have sparked this initial drop. However, I believe that we are now about to see a fundamental shift in sentiment that will do some very serious damage to ARM's multiple. The upcoming "Computex" event in Taipei, Taiwan will likely trigger the next leg down.

Intel Unleashes The Kraken At Computex

I believe that a nontrivial part of the recent sentiment change is the likely Galaxy

It's time to get out of Medical Marijuana (MJNA.PK). Well, actually the time to get out was when the stock traded over $0.30, and I was pounding the table to get out. There is still plenty of downside left in this stock though, and I believe that the shares will be trading in the $0.02 - $0.05 range within the next couple of months, if not sooner. This is a penny stock that was pumped up based on a misleading "earnings report", and what you are seeing now is an orderly march to the exits. Whenever this stock pops - I repeat whenever it goes up - sell into strength before it's too late. Do not get greedy, do not "hope that it pulls a Medbox", just sell.

The Pumpers Try To Fool You

With a stock like this with questionable financials and management, you need to go underground

At the recent Bank of America Merrill Lynch 2013 Health Care Conference, Craig Audet Ph.D. gave an overview of Arena Pharmaceuticals' (ARNA) launch for Belviq, its FDA approved anti-obesity medication. While many longs felt that this presentation forecast $200 M first year sales for the drug, I took away a vastly different message. Based on the details provided at the conference by Mr. Audet and a general understanding of effective pharmaceutical sales, I will walk investors through my takeaways below.

Key facts of the projected launch for Belviq

o 26,000 targeted specialists (Cardiologists, Endocrinologists, Obesity Specialists, etc.)

o 200 sales reps assigned by Eisai to Belviq in U.S.

o On average, only 43% of physicians will agree to meet a sales rep

Based on these details and industry averages, we can now make a quantitative estimate of Belviq's sales for its first 3 months on the market.

o

With a huge rise in the solar sector, Suntech Power (STP) has reached over $1 per share with a market cap of over $200 million. At the same time, Suntech's convertible bonds haven't budged in value from 20+ cents on the dollar. After consulting two sources, who wish to remain nameless, I have found the reason the bonds are trading at all time lows is that the bondholders find it very unlikely that they will receive any of their money back. One source who owns bonds and is short the stock told me:

Notice that while the Suntech stock is rallying, the bonds haven't changed hardly at all. If there were value in the company, a big investor would buy the bonds. If you look at comments on Twitter, nobody has a clue about Suntech the company. They are just traders looking for momentum. Everyone should be buying puts on

When you know a relationship with a woman (or a guy) is going to do nothing but get worse quickly, most sensible people will kick her/him to the curb. This means you will end the relationship before you go through the truly painful experiences that a bad relationship brings. My radar is saying that Lululemon (LULU) will soon bring that same kind of pain to investors if they do not kick LULU to the curb.

Lululemon is a designer, manufacturer, and distributor of athletic apparel for women, men, and female youth (don't say teens or girls). It operates in the US, Canada, Australia, and New Zealand. It plans to expand to many other countries in 2013, which could be an expensive problem in itself. Its offerings are generally chic. Its models are attractive, but seem to be chosen to be a bit less than perfect. In other words, they are

Yum Brand (YUM) has been recently cleared by Shanghai Municipal Food Safety Committee after being accused of getting dubious quality mutton from a wholesale food supplier. While it has been cleared in the mutton scandal, the negative publicity, as well as the threat coming from the deadly avian flu, has created problems for Yum in China. The company gets more than half (51%) of its annual revenues from the country where it commands a 39% market share in the $14 billion fast food industry. Yum has recorded impressive growth in emerging markets but now it is facing significant challenges in China.

Last year, China Central Television reported that Yum! Brands and McDonald's (MCD) may have sold chicken that were fed antibiotics and growth hormones. Liuhe Group Co. and Yingtai Food Group did not properly inspect the chicken they bought and supplied to their customers, including KFC and

ARM (ARMH) is the biggest pure play technology licensor in the world with a market capitalization in excess of $23 billion. The company's IP is used in a vast majority of graphics and logic processors shipped in the world today. ARM architecture has a near monopoly in the mobile devices market with all the major players such as Qualcomm (QCOM), Nvidia (NVDA), Samsung (SSNLF.PK), Apple (AAPL) etc. using ARM IP to design and produce their mobile chips. The company's design places emphasis on low power consumption which has made it a favorite for use in mobile devices. x86 architecture is not optimized for energy consumption, as a result of which it has almost no presence in the mobile industry. ARM gets a licensing fee for each processor that is shipped using its IP and also a royalty payment from its customers. Mobile device shipments have boomed in the last 3-4

Over the last month and a half I've watched in awe as Tesla Motors (TSLA) pulled off a masterful short squeeze and follow-on financing that has supporters dancing in the streets and fanboy bloggers making all manner of preposterous forecasts. Now that the dust has settled and the irrational exuberance has cooled a bit, it's time to take a calm and objective look at some of the dark clouds that host the silver lining.

The Light and Fluffy Q1 Profit

Anybody who can read a disclosure document knows that Tesla's Q1 net income of roughly $11 million was a fluke that's not likely to be repeated. Tesla lost about $91 million on its principal business activity of making and selling cars. Its reported net income was solely attributable to events and payments that are unlikely to be a reliable source of recurring future revenue including:

• $68 million in ZEV credit

On several occasions I prefer to look at a company's valuation from a pure 'Replacibility' or 'Replicability' within its industry. Replacibility being its susceptibility of being replaced by a new entrant and Replicability being it susceptibility of being copied. One company that has often fallen on the list for this analysis methodology is Netflix (NFLX) - more because of the industry that it belongs to: Media Delivery. This industry is ultimately about getting the acquired content to the end consumer and Netflix had been the David of the market when Blockbuster was the Goliath. Back in 2005, a small company was able to replace a larger Blockbuster due to the delivery model that it brought with it. However, I now find Netflix to have grown so much in its valuation that it is the new Goliath of the Media delivery playing field.

In my mind, this industry is about three

Amazon.com (AMZN) is in the Danger Zone. The belief that Internet retail is or will be more profitable than traditional retail is untrue. Amazon is in a competitive, low-margin business that cannot justify the profit growth implied in its valuation.

Stuck With a Low-Margin Business

Amazon's after-tax (NOPAT) margin is a paltry 1%, ranking 1,428th out of 1m515 U.S. companies that I cover with at least $1 billion in market cap. Out of 178 retail comps, its margin ranks 154th. For comparison, AMZN's market cap ranks as the 26th largest out of all 3,000 stocks I cover and ranks third among the 178 retail comps. Can you smell the disconnect?

As Figure 1 shows, back in 2004, Amazon's NOPAT margin was a robust 6.6%. At that point, Amazon and eBay (EBAY) were fairly dominant players in online commerce. Amazon could price items high enough to maintain a higher

It's been a couple of weeks now since Dendreon (DNDN) reported an absolute train wreck first quarter. Revenues plunged, cash burn was extreme, and doubts over the company's future increased. Now that we've had some time to fully digest the results, I'm here today to discuss what the analyst community has said about Dendreon recently. One thing is certain. Analysts are becoming very skeptical, and that could pose some serious questions about this company's future.

A recap of Q1 results:

Dendreon reported a revenue drop of more than 17.5% for the quarter, coming in at $67.6 million. This number missed even the most bearish of estimates, and the consensus called for $80.15 million. Dendreon blamed the poor number on increased competition. Additionally, gross margins declined a little from Q4 levels. GAAP gross margins were under 36%, but the company has reiterated its stance that restructuring efforts will get them