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  • Without A Generous Dividend, What's Left For Chevron Shareholders?  [View article]
    For at least 20 years, the cost of finding and extracting oil has increased, with an exception over the last five years from the use of hydraulic fracturing in shale deposits. The cost trend is still up because oil is a nonrenewable resource. Many marginal producers, including those using fracking of deposits in North Dakota and elsewhere, no longer can produce profitably at the going price for oil. Eventually their production will decline, while at the same time, the demand for crude will remain constant or increase, albeit at a lower rate than in previous years.

    It's clear to me, as a long time CVX holder, that management believes (1) it has sufficient reserves to sell at least some profitably at $30 prices, and (2) supplies from marginal producers will decline to the point where the price of crude rises to levels that will make most Chevron resources profitable.

    The world isn't about to stop using oil; not yet, anyway.
    Feb 4, 2016. 09:28 AM | 3 Likes Like |Link to Comment
  • Qualcomm: I'm Not Buying The Panic, But I Am Buying More Shares  [View article]
    As a long time investor in QCOM, beginning in January 1992, I continue to hold the shares. Looking at recent developments, I agree that the company is making some investments that appear to be reasonably good over the next several years, especially in enterprise server chips based on ARM architecture.

    I have two issues, however. The company, generating far more free cash flow than it needs, remains overcapitalized, notwithstanding its recent repurchases of some 12% of the shares. And second, the top executives are getting paid too much, both in salary and stock, given the recent below average earnings. But overall, Qualcomm is a better, lower risk growth opportunity than most other stocks, particularly at these prices.
    Feb 3, 2016. 05:50 PM | 2 Likes Like |Link to Comment
  • Corning Inc: Little Growth In 2016  [View article]
    Corning is one of the best managed companies, not only from the point of view of developing new products but in the way it treats its employees. My only concern relates to the possibility that OLED displays using a plastic substrate will take market share from not only Gorilla Glass in smartphones and tablets but from TV as well.

    On the other hand, I believe there is a huge market for Gorilla glass in automobiles, especially for front and rear windshields, because of the weight reduction and the impact of that on better fuel mileage. Just as Ford substituted aluminum panels for doors in its light trucks, with an attendant increase in fuel mileage, so can GG substituted for tempered glass create possibly even greater weight reductions, which will be necessary in order to meet stricter mpg requirements.

    If a stock appears to be going nowhere in the near future, that is the time for investors to consider buying at what would appear to be bargain prices. The current price of GLW may not be a real bargain, especially if worldwide demand for smartphones levels off, and TV display growth stagnates. But if the overall market begins to recover and GLW remains near its present price, it may be worthwhile. Or if stock prices drop considerably (which I believe is not all that likely), Corning certainly would drop as well, making it a better buy.
    Feb 1, 2016. 10:59 PM | Likes Like |Link to Comment
  • Solazyme Reduces Annual Cash Burn By $40 Million And Improves Focus  [View article]
    The management record is clear: Management hasn't a clue on how to run a big operation. Yes, they can operate a pilot plant and make cosmetic oils that sell at extremely high markups. But they have shown they can't operate a big plant effectively – specifically Moema. I don't blame management entirely for the problems in Brazil. The country is rife with corruption. They are faced with drought, Zika virus, a rather unenergetic work force, and numerous other problems that maybe even good management couldn't cure.

    But the lesson is that you don't plan a facility with a huge capacity unless you have some real experience running that kind of plant. It would have been better to build small plants near key markets and/or license more experienced manufacturers to make and sell products in specific markets. Example: You don't have to rely on sugar production in Brazil. Many other countries produce sugar at prices no higher than in Brazil.

    I am relieved at having sold my shares at $3, for a loss of only 50%. There may come a time when SZYM or its successor is worthwhile investing in, but it's still far in the future.
    Feb 1, 2016. 10:07 PM | 2 Likes Like |Link to Comment
  • Qualcomm: Growth Is Dead  [View article]
    "Meanwhile, we're tilted toward a recession and the stock market's due for a hard fall--probably in a hurry, whenever it gets underway."

    This is the kind of nonsense published by those who believe the present administration can't possibly do anything good. If you really believe this stuff, please give us the data that predicts a recession. Annual GDP growth of 2% (a conservative estimate)? Worldwide growth of 3-4% as predicted by The Economist (with their prediction of growth in China around 6.5%, which is below most estimates)?

    Yes, the stock market can fall, especially if big investment firms predict a crash, but don't tell the public that they're ready to pounce when prices really get low. Of course this manipulation strategy might run afoul of a few existing laws, but in a deregulation climate, who's going to enforce them?

    What is known is that China has the largest dollar surplus of any nation, and is using those dollars to buy technology it believes it needs. Thus, a Chinese group (Tsinghua) is providing $4 billion to Western Digital so that WDC can buy SanDisk and all its flash memory technology. Chinese interest might also decide the best way to really capture the wireless communication market is to buy the company that sells by far the largest number of smartphone chips (radio chips, processors, power management, etc., not just processors). So I really hope those who are short the stock, take their profits now. China is no longer a problem for Qualcomm, other than being in a position to send Qualcomm's top management to the unemployment line.
    Feb 1, 2016. 09:52 PM | Likes Like |Link to Comment
  • Qualcomm: Growth Is Dead  [View article]
    Hmmmm..... Let's see. QCOM has $30 billion cash and marketable securities. Shareholder equity also is $30 billion, according to the latest financial data released yesterday. That means the rest of the company – patents, buildings, employee skills, etc. – is valued on the books at zero. Book value, all in cash, is more than $20 per share. The present price is less than 2.5 times book value, whereas tech sector stocks typically trade anywhere from 3 to 8 times book value. And you think QCOM is a sell?
    Jan 28, 2016. 06:30 PM | 24 Likes Like |Link to Comment
  • Apple's Slow Down Will Weigh On Qualcomm  [View article]
    A slowdown in sales of mobile devices for Apple is not necessarily bad for Qualcomm. It depends on whether the slowdown affects all smartphone/tablet makers, rather than just Apple. It's true that Qualcomm supplies about 5 different chips for iPhones, excluding the processor chip, which is Apple's own ARM based design. There are approximately 70 or more different smartphone models, however, many of them made in China, which use several Qualcomm chips, including its Snapdragon processors. If the total number of non–Apple smartphones that contain Qualcomm chips (including certain models from Samsung) increases, as is likely because Apple aims mainly at high end users, then the prospects for Qualcomm may improve.
    Jan 27, 2016. 02:44 PM | 1 Like Like |Link to Comment
  • What To Expect From Biogen's Earnings Report  [View article]
    Though Biogen has an enviable position on drugs to treat MS, there are some new developments that could disrupt this market. The latest issue of The Economist details research on the use of chemotherapy to treat the immune disorder associated with MS. Do you know about this new technology and how it might impact BIIB?
    Jan 21, 2016. 07:43 PM | Likes Like |Link to Comment
  • Resetting Expectations For MannKind Corporation  [View article]
    For most investors with relatively small holdings in MNKD, selling at a loss, even after a recent price gain, makes little sense. A loss might be considered for tax purposes, but one has the next 11 months to decide on that. Meanwhile, the potential for Afrezza is based on:

    1. It works better than any other drug for certain kinds of diabetics.

    2. It is easy to administer.

    3. It may eventually receive more support from insurers.

    4. A takeover by another firm is a possibility, though this may not give existing shareholders much gain.

    Taken together these are sufficient reasons for me to continue holding my relatively small position.
    Jan 15, 2016. 11:24 AM | 3 Likes Like |Link to Comment
  • MannKind - Wait And See Or Jump The Ship?  [View article]
    As an investor with a relatively small holding in MNKD shares, my potential loss would not be much greater if the shares went to zero. Moreover, if I'm going to take a tax loss this year, I might as well wait until the end of the year, by which time something good might happen (it can't get much worse!). So I am going to hold my shares, perhaps as long as next December.

    Meanwhile, I see some positive developments: A company other than Sanofi might be interested in buying MNKD. The price might well be $1 per share or less. The company I believe most interested in MNKD is Lilly, because it has lost some of its really long term glitter as a major producer of insulin.

    Those that have tried Afrezza and like it, may not want to change to another drug that is more difficult to administer. They may be forced to change, however, if insurers continue to decline to give it tier 2, or even tier 3 status (that may not be the case in other countries, however). Diabetes is difficult to regulate, especially for older diabetics. If Afrezza can be shown to be easier to regulate diabetes than other competing drugs, then it will have a niche market of sufficient size to be profitable in terms of return on investment for for a firm buying it near its present price.

    I do think the company needs to be sold. The present management, even if one gives the benefit of the doubt to the new exec, is really unable to improve the company on its own. Mr. Mann needs to humble himself enough to let someone else finish the job.

    As an investment advisor, with more than 60 years active investment experience, I would simply reiterate my view, stated at the beginning of this comment, that it would not be sensible to take a loss now, but would make more sense to wait until later in the year, December if need be.
    Jan 8, 2016. 02:17 PM | 4 Likes Like |Link to Comment
  • Kodak: Melting Ice Cube With No Growth And Hidden Liabilities Offers Substantial Downside  [View article]
    As a long time resident in the Rochester NY area, I have seen first hand the decline and fall of a company based on the now outdated slogan, "You press the button. We do the rest." That simple business plan first espoused by founder George Eastman led Kodak management in later years to disavow digital photography altogether. Why? Because digital eliminated Kodak's middleman position of processing and printing, and Kodak still wanted to "do the rest."

    This article gives exemplary details on why the company continues to fail. But there's more to it than just the individual elements in what remains of the firm. It's the culture itself. Back in the 1970s, Kodak, trying to regain control of its "we do the rest" middleman profits, decided to make and market its own instant cameras, similar to those made by Polaroid. Kodak at that time made all of Polaroid's film material, but that wasn't enough, apparently. They wanted a piece of the action that would include selling Kodak's own film and paper under its own label.

    A Kodak employee told me what happened next. Kodak went to Polaroid to ask for a license to allow Kodak to make its own instant camera and film. Polaroid refused a license, but then Kodak said it would produce its own product anyway. What resulted was a patent infringement suit, in which Kodak was found to have violated some 12 key Polaroid patents, ending Kodak's instant camera business and giving Polaroid a few more years before digital eliminated the need for both.

    One could also cite the difficulties Kodak brought on to itself in its labor relations, especially its efforts in the 1960s against minority employment. And its Band Aid strategies to circumvent environmental degradation near its factories, forcing purchase of contaminated housing and slap-on-the-wrist fines for illegally transporting hazardous materials. I could go on, but the point, in short, is that the writer of this article has described in great detail why Kodak shares may be the best short sale of an entire era.
    Dec 30, 2015. 12:48 PM | 1 Like Like |Link to Comment
  • Another Enemy For Qualcomm: Huawei  [View article]
    Let's be more precise. LICENSING fees have been decreasing because there are so many firms already licensed. The latest announcements today show that even smaller firms are now signing licensing agreements. Most firms already are licensed, and the only remaining large firm still unlicensed is Lenovo.

    Meanwhile, the fact that more firms, especially in China, are signing licensing agreements suggests an INCREASE in royalty payments later on. Note that royalties are reported in the quarter following the period in which they were paid, so the royalties from licensees for the current month of December will not appear on the financial statement until next April. The income reported at that time will accrue to the QTL (licensing segment) of QCOM operations.

    As for chip sales by Qualcomm, it's true that margins have been declining, based in part on new competition from Taiwan (Mediatek) and mainland China, as well as from Korea (mainly Samsung). I worry less about that segment of the business, even though it is the largest in terms of sales, and much larger than the licensing segment. The reason I worry less about chip sales is that Qualcomm is a fabless chip producer. If it chooses, it can simply stop making chips, particularly for low end applications, and concentrate on higher end chips, such as the Snapdragon 820, which will bring in higher profit margins.

    The key to future profits, in my view, is NOT necessarily tied to increasing sales of QCOM chips but to continued royalties, no matter who makes the chips. As long as Qualcomm maintains its leadership in wireless technology, it will remain a cash cow, just like the old RCA Corporation, with its key patents for AM radio, and later TV (but not FM radio). To maintain its leadership, Qualcomm will have to provide a working environment that attracts the best engineers and scientists, as they have been able to do from the start.

    You can argue that Qualcomm may not be the place it once was for enthusiastic workers, but it still ranks among the 100 top firms to work for.
    Dec 29, 2015. 04:39 PM | 9 Likes Like |Link to Comment
  • Did We Just Witness Peak Qualcomm?  [View article]
    There are so many points that the writer (I hesitate to use the term analyst) ignores that one wonders whether he has any understanding of the largest chip designer and producer for the wireless communication sector.

    Qualcomm receives royalties from firms that use its technology, regardless of who makes the chips. Royalties per unit shipped will change, based on average selling price, which has been declining somewhat (but not a lot, because of additional features in smartphones) over the last several years. Total units shipped, which generate royalties, are actually increasing because of the number of devices that incorporate one or more claims based on Qualcomm patents. The writer had a graph that referred to this, but the true implications were ignored.

    A shift from royalties based on wholesale price of the devices to price of the individual component that uses one or more QCOM patent claims would involve renegotiating the existing licensing agreements. Though more complicated from a bookkeeping point of view, a shift of this sort might actually result in HIGHER royalty payments from firms like Apple, which uses about five separate QCOM chips in its iPhones (even though the processor is Apple's own design). A royalty rate as high as 25% of the chip cost would not be unreasonable and would not differ markedly from the criteria comprising so-called "FRAND" rates.

    What the writer ignores is that, under present licensing agreements, including those made under the terms imposed by Chinese regulators, it takes only one claim from one patent to trigger a royalty payment. Qualcomm, with over 17,000 patents, remains the largest holder of essential patents for wireless communications – by a very large margin. No company, including Chinese firms supplying only their domestic markets, can sell a state-of-the-art smartphone that doesn't use at least some Qualcomm patents, if not chips designed by Qualcomm. And where another firm also has essential patents useful in QCOM designs, the two firms cross license their patents and profit mutually from them.

    The only real problem, which the writer didn't even mention, is getting ALL the royalty payments that are due, not only from new sales but from previous sales that went unreported by firms relying on ambiguous laws to further their own interests. It appears that recent licensing agreements, such as those reported today by Qualcomm, suggest that this problem is being resolved. At least several new licensing fees will be reported in the first FY 2016 quarter ending December 31.

    Do these additional facts reinforce the argument that QCOM profits have peaked? I think not. The reverse is true: The world is switching to smartphones or smartphone based tablets as an essential computing tool, replacing desktop and laptop computers to a large extent, generating a stream of royalties and related revenues in Qualcomm's direction for a good many years. Any other conclusion is sheer nonsense.
    Dec 29, 2015. 01:54 PM | 50 Likes Like |Link to Comment
  • Another Enemy For Qualcomm: Huawei  [View article]
    The statement ". . . if Huawei continues on this route with personal SoCs with integrated modems, it will be able to completely exclude Qualcomm from its smartphones" seems to ignore the fact that Huawei, as a QCOM licensee, pays royalties on all devices it makes that use QCOM patents, regardless of who makes the chips. The same is true for firms that use MediaTek chips, made under license from QCOM, as well as several other companies, including Samsung, that rely on Qualcomm proprietary technology

    The only issue regarding Qualcomm and its Chinese licensees (including those that, though unlicensed, sell devices that use QCOM patents) is getting paid for each and every device that uses QCOM patents. This is still a serious issue, but the recent licensing agreements between Chinese firms and Qualcomm suggest that this issue is being resolved.
    Dec 29, 2015. 12:26 PM | 5 Likes Like |Link to Comment
  • Corning slides on JPMorgan downgrade  [View news story]
    Display glass for TV is the main product made by Corning in terms of total revenue. It dwarfs the income from specialty glass (i.e., Gorilla Glass) and the last time I noticed was also greater than the revenues generated by fiber optics. So, if the demand for TV glass remains weak, then that alone is a reason why JP Morgan might have downgraded the shares. However, I question whether the display glass demand is actually that bad, given the recent deal between Corning and Samsung, where Corning bought an LCD facility from Samsung in order to INCREASE its production capacity.

    What is not mentioned is the rumor that Apple is investing in a plastic LED display facility in Taiwan, which might mean that Apple eventually may switch from Gorilla Glass to some type of LED display for its iPhones and iPads. If this is the case, then the long term prospects for Corning would be lowered.
    Dec 17, 2015. 12:13 PM | Likes Like |Link to Comment
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