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Hello. As the Editor of The Money Journal (money-journal.com), I have devoted a lifetime to the study of stock, financial markets, investing, and successful money management. I invite you to read my articles and posts, and I hope that you enjoy the advice, guidance and inside secrets that I share.
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  • The Truth Behind Marijuana Stocks

    I love the stock market… There are many opportunities to make money, utilize analytical thinking skills, and feel proud when your hard work and insight pays off with a nice profit.

    But I have to admit that there is a frustration… and that is all of the commentators and "analysts" that claim to be unbiased, but clearly have an agenda in their posts.

    Reading their posts is like driving past a horrific automobile accident… it is tragic, but you can't help but look.

    This is especially true for stocks in the emerging legal marijuana industry. One Seeking Alpha commentator claims to not have any positions in the stock he discusses, but it doesn't much digging to discover that he runs a fund that has positions in the competitors to the stocks he bashes. In other words, while he may not have a position in the stock he tries to destroy, he does have multiple positions in the sector. So when an investor want to get in to that hot sector, they are naturally led down the path toward the stocks he owns.

    You see his comments under a number of different names on Seeking Alpha and on message boards, all attempting to discredit some stocks in order to drive investors towards the stocks he owns.

    While this is somewhat amusing, it is also clearly wrong. His advice is not impartial. Rather than being upfront with readers, he spends a great deal of time and energy on this type of "back door" promotion of the stocks on which he stands to personally gain.

    Two of the stocks he regularly bashes are Medbox (MDBX) and AVT (AVTC). He has launched a serious of attacks, stooping to the lowest levels to try and dig up some dirt.

    But he has failed.

    And here is why: These stocks are good. The companies are good. They make real products, real revenues, and real profits. Neither is an IBM or Coca Cola, but they stand in stark contract to some of the other stocks in the marijuana sector, which are purely speculative.

    AVT has revenues of around $15 million, and a forecast of $25-$35 million for 2014. It has several revenue streams, and derives income from a number of sectors. It is profitable, it are growing, and the stock is a bargain.

    Medbox shows a profit on revenues of about $5 million, but is set to explode as more large states legalize medical or recreational marijuana. It has a "shareholder friendly" attitude and has rewarded long time stakeholders with substantial dividends. Medbox is not in the business of growing or cultivating marijuana. In fact, it has a patented system that keeps dispensaries in compliance with full transparency, so all taxes are paid, and records are scrupulously accurate. I think that's a good thing.

    In summary, be careful where you get your advice. Do your own homework, because there are "advisors" out there that have agendas and personal reasons for the leading you towards or away from any stock.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Jan 09 12:11 PM | Link | 2 Comments
  • Giants Like eBay And Sony Validate AVTC

    A short time ago I made some predictions about the future: what's hot, what's not.

    I have talked about Automated Retailing - sometimes called Self-Service Retailing, or micro stores, or even just customized vending machines.

    Clearly, this wave of automation is going to continue to grow, as it allows retailers and brand owners to sell more products in more locations, without additional employees or high overhead.

    Recently, news came out about several industry giants getting into the game: eBay (ebay), Sony (SNE), Toms Shoes, and others.

    At Westfield San Francisco Centre, people can touch and interact with digital storefronts for Sony, TOMS and Rebecca Minkoff to select and purchase over 100 products.

    "Store of the future, here we come," eBay's blog proudly announced.

    Steve Yankovich, eBay Inc.'s head of Innovation and New Ventures, told USA Today the company plans to put the systems inside existing physical stores too and that the company plans on expanding in this market. "This is not a pilot for us," he said. "This is a thing we're going to scale."

    However, as an investor, this tells me something more important: That the automated retailing industry is real, it is growing, and it has now been validated by industry leaders, like eBay, Sony, and others.

    So how does an investor take advantage of this red-hot, growing market? I don't think it's by investing in eBay (see my post on this company), or even in Sony - as they are into so many other areas that Automated Retailing will only make a small impact on their bottom line.

    The smart money is on the manufacturers of these systems. Companies like AVT (AVTC), which seems to generate a lot of press (I think there are paid analysts that post blogs and messages just to malign the company). However, the company is rock-solid: with millions in earnings, important patents, and the most dynamic products in the market.

    AVT's stock is significantly under-valued, and I believe that it can grow by many multiples.

    I'm glad that eBay and others are getting into the act. It serves notice that this is a dynamic industry that can offer some great growth potential for the individual investor.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Dec 05 12:39 AM | Link | Comment!
  • 2 Out Of 3 'aint Bad

    A recent article on Motley Fool stated that eBay, Coca-Cola and McDonald's are "perfect" stocks. They state that a perfect stock is one that is predictable, profitable, and cheap, and that it is hard to lose money if you only buy stocks that meet all three criteria. Three stocks mentioned above currently meet those criteria, according to The Fool.

    We agree... on two of the three.

    Coca-Cola and McDonald's are superstar stocks.

    eBay is not.

    Here's why:

    As the Fool points out, one key to making a "perfect" stock is predictability. McDonald's and Coca-Cola are predictable. McDonald's serves fast food, and Coca-Cola sells carbonated soft drinks. While company has unrelated operations from time to time, the core of each company's operations remains the same.

    "Another part of predictability is the tendency to earn the same level of profit per item sold each year. A company that generates a consistent profit margin each year is likely insulated from competition and has control over its prices. Over the last ten years, eBay, McDonald's, and Coca-Cola generated remarkably consistent free cash flow margins; none fluctuated more than 20% from the mean in most years -- extremely low rates of fluctuation," the Fool said.

    Another component that makes a stock "perfect" is the ability for competitors to come out of nowhere and take away market share. McDonald's and Coca-Cola are well-established and it is unlikely they will lost their dominant positions anytime in the near future.

    eBay, on the contrary, can lose market share overnight to an internet startup that becomes red-hot, or to an established giant like Facebook, who could enter a similar arena. It's been rumored that Facebook will soon introduce a payment system, which will likely severely impact Pay Pal (owned by eBay). Facebook has a huge following and many people are not happy with Pay Pal. Look for a big swing in customer loyalty the day Facebook launches their payment system.

    Moreover, eBay is not being honest with their investors. As the Fool mentioned (in a different article), "Over the past 12 quarters, going back to Q3 2010, eBay has bought back $3.6 billion worth of stock. The stock has approximately doubled over that time frame, so you might be thinking that was a great use of capital. Unfortunately, the diluted share count only decreased by 1% over those 12 quarters. The count went from 1.328 billion shares to 1.313 billion at the end of the recent quarter.

    How can a company buy back $3.6 billion of stock and only reduce its share count by 15 million shares? That would imply a cost of $241 per share on average. We know the stock price was in the range of roughly $25 to $50 per share during that time.

    The answer is that eBay issues a lot of stock to its employees. During the second quarter, their reported free cash flow was $658 million and they used 70% ($466 million) of it to repurchase shares. In Note 15 of their annual report, management clearly discloses the goal of their share repurchase program: 'These stock repurchase programs are intended to offset the impact of dilution from our equity compensation programs.'"

    Back to the two winners:

    McDonald's operates in an industry where it uses its enormous scale to extract concessions from suppliers, attract the best franchisees, and appeal to a worldwide consumer base. As a pioneer in the quick-serve restaurant industry, McDonald's continues to benefit from its first-mover advantage, and only a mass consumer migration away from fast food can impede its earning power.

    Like McDonald's, Coca-Cola earns predictable profits due to its unmatched scale. It has a distribution network that no other competitor can replicate and a brand that consumers worldwide can identify. As with McDonald's, Coca-Cola's competitive advantages are too great for a rival carbonated-beverage company to overcome; the only plausible cause of declining profitability is a mass consumer migration away from carbonated soft drinks.

    Finally, there is the Warren Buffett factor: He is the single largest shareholder in Coca-Cola. He knows what he's doing. If we all followed his advice, we'd also be billionaires.

    Moreover, Coke Coca-Cola is an exportable brand. It is something that all people in all countries can enjoy and the company has a massive distribution network that can deliver the product to all parts of the world. Average consumption worldwide is one-fourth the rate of that in the top 10 markets for Coca-Cola. On paper, that's a vast untapped market.

    So drink up and eat up. McDonald's and Coca-Cola. Two great... no, make that "perfect" stocks!

    Dec 04 11:00 PM | Link | Comment!
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