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  • Why Tesla Is The No. 1 Performing Stock  [View article]
    The most important charge I made was that companies that use spin and slant in their public reporting are precisely the companies that are going to conceal adverse information from the Street until they are forced to disclose it by lawyers, accountants and regulators. Its a pattern recognition thing. Like when people fudge their resume, those are the guys who are most likely to fudge on the numbers when they are in a position of power.

    A leading indicator. That leading indicator needs to be discounted in the stock price. That hasn't happened here just yet.
    Sep 2, 2013. 12:18 PM | Likes Like |Link to Comment
  • Why Tesla Is The No. 1 Performing Stock  [View article]
    Peter, I like having you in the stock. Its comforting to know that this is what a Tesla bull thinks like.

    You are very trusting. Its sort of sweet and innocent.
    Sep 1, 2013. 01:38 AM | Likes Like |Link to Comment
  • Amazon.com: The Mix Matters And Explains Most Of The Profit Implosion  [View article]
    He is a good CEO, no question. And he is playing the tough hand he has as well as possible. Its not his fault that the EGM sectors of ecommerce have become so brutally competitive that every player in it will give away all the profit for the marginal revenue dollar.

    And its in his interest to downplay the risks he faces while he runs as fast as possible to try to find a viable business model before the Street understands that the current business model is not transitional, its mature.

    For some reason investors overvalue the ability of good management to solve structural business problems, and to separate their enthusiasm of management from the accurate analysis of the dynamics of a business.
    Aug 25, 2013. 08:38 PM | 9 Likes Like |Link to Comment
  • Amazon: Is There A Top In Sight?  [View article]
    Gold has no fundamentals, its all sentiment. So you couldn't have the same posts.

    You guys should read Fooled by Randomness.
    Aug 15, 2013. 01:33 AM | 1 Like Like |Link to Comment
  • Amazon: Is There A Top In Sight?  [View article]
    Well done.

    Its amazing how people casually throw multiples around without having any idea what they mean, and why different companies with different business models command different multiples.
    Aug 15, 2013. 01:27 AM | Likes Like |Link to Comment
  • Amazon Earnings Preview: A Secular Growth Story At 28X Cash Flow  [View article]
    What would be your reaction and view on value if the company comes in again this afternoon and guides to reduced earnings or a sizeable loss for the next quarter? Did the guide down in the April quarter announcement concern you?

    The one thing that is most surprising is to many investors the stock trading so well when the earnings estimates have been slashed, not just for one quarter but for the next year.

    Does the recurrent reduction in guidance over the last 4 quarters concern you as to the profitability in the company's long term business model, or how long it will be until the company achieves that business model?
    Jul 25, 2013. 02:37 PM | Likes Like |Link to Comment
  • ChannelAdvisor Data For Amazon In June Is Out, Conclusion Remains The Same  [View article]
    Its surprising, but I think it all just shows the massive thirst that growth funds have for vehicles to play in. One might think that when Apple stopped growing, it would tell growth investors that they need to be careful about overpaying for growth stories, because big markets become intensely competitive, and big stocks get overloved and overvalued. But in fact, the opposite happens. It simply removes that name from available pool of growth investment vehicles. So the remaining growth stories end up attracting more capital.

    There will come a time when the growth funds themselves will be examined and scrutinized, and there will be accountability for this kind of investment strategy. Right now, there is no fear in overpaying, only in missing the upticks.

    I suppose the correct thing to do is to wait on the sidelines for a more balanced investment environment, a better entry point on the short side.

    I also expect that Amazon has some financial engineering coming. A big convertible issuance, and maybe hints of a spinoff of AWS. Gimmicks.
    Jul 12, 2013. 12:57 AM | 2 Likes Like |Link to Comment
  • ChannelAdvisor Data For Amazon In June Is Out, Conclusion Remains The Same  [View article]
    I don't think the stock action is a result of analysts pumping it. Analysts in big visible stocks are more often reflection on what the institutions are saying, rather than leading them.
    Jul 12, 2013. 12:50 AM | Likes Like |Link to Comment
  • ChannelAdvisor Data For Amazon In June Is Out, Conclusion Remains The Same  [View article]
    In a perverse way, I actually think the shareholders who own this don't want there to be profits. Once you have profit expectations, you have risk of missing them. Better to keep it a pure concept stock forever.

    I wonder if there is any metric that matters. Obviously any business can grow indefinitely if there is no need for profitability. There will always be new markets to enter where market share can be obtained by price cutting.

    If you asked Ken Allen at T Rowe what would make him say that Amazon had gotten overvalued, what would he say. Is there any valuation or metric that would matter? I think he would say yes, but if the company missed that metric, he still wouldn't sell.

    One of the elements of this game is the way that Amazon never gives any metrics by which their progress can be measured. You don't see them say "AWS will be 4 billin next year" or Groceries will be 3 billlion next year. They just maintain maximum flexibility to change the conversation when they start to stumble.

    Bezos core competency is understanding the problems of money management for growth investors, taking advantage of the distortion in our capital markets caused by too much money in growth funds.

    I wonder if Bezos gives a lot more data to these funds, so they can track metrics that are not publicly disclosed. I have heard rumors to that effect, but its impossible to know.
    Jul 11, 2013. 09:28 PM | 3 Likes Like |Link to Comment
  • ChannelAdvisor Data For Amazon In June Is Out, Conclusion Remains The Same  [View article]
    The short books at hedge funds have been getting killed this year, and for this reason the funds allocated to the short side have been reduced. This is a technical headwind for the Amazon short side.

    The growth funds have seen inflows. Those funds feel pressure to be in every momentum situation until the momentum or growth is demonstrably broken. This is the technical problem we face.

    You would think that all instiutional investors including growth funds would look across the market and ask whether growth vehicles are priced fairly with an attractive risk reward profile, and if not would pull back and look for better values, even if those better values are not big growers.

    But thats not what happens. Instead, the funds simply allocate among the growth names, largely based on momentum. The people who manage those funds know they will be penalized if they are light on the growth names that are going up. And if those names stumble and go down, well the funds will have lots of company in losing some money. So this areciprocal pressure feeds on itself, particularly when short sellers are losing their trading capital. As John Bogle says, one of the big things that retail investors don't appreciate is the career management pressure on institutional investors.

    As part of my portfolio managment, I need to have some short exposure. There is only so much beta I want to have. So I need to be short something, or I can't put as much capital to work in the names that I believe are undervalued. To date, I have been short Amazon as way to reduce beta. The question is whether this short will work when the market sells off. I think it does, but I am not so sure.

    I think Amazon is a terrible business. Not just an overvalued stock, I think its a bad business. It is clear to me that they do not generate sizeable profits even when they succeed in buying market share and waiting out competitiors. The fiasco with Kindle is an example. In books, they don't make money even thought they dominate the sector. I also think the overall publishing business is damaged by Amazon as people buy fewer books over time. They load up their kindle or ipad when they get it, then they reduce purchases.

    I also know that AWS is a crappy business long term. Its true comps are low margin outsourcers like CSC. Companies that provide commodity high volume services to big entities under big contracts. Look at what AWS is doing now. Building private clouds for the government. Just like CSC, EDS (HP), IBM global services. The fact that AWS is building private clouds is a testament that they can't get the sensitive data of big companies on their public cloud. Its a serious problem with the AWS business model. Companies use AWS for test and development functions that are not really mission critical. But on the sensitive stuff, they want a private cloud.

    But the growth investors think they can play it before the poor business model is visible. And who am I to say they can't? Money flows in, buy Amazon.

    Many of the top analysts have figured this out. But there is no money or carreer glory in being overtly bearish. This company is one of the very few big tech companies that might do a very large equity financing. All the rest have too much cash. Amazon could do a massive convertible debt deal and pay the Street. You don't get fees for not being in the deal. And the big growth investors do not want to see analysts slam this name.

    So you get half hearted bear cases, like the comments from Morgan Stanley and JP Morgan. It will be really really interesting to see what those two analysts who are quietly bearish on Amazon, do with the current quarter.

    The other thing that will eventually be an issue is the inconsistant and misleading disclosures. For example, AWS is clearly a business segment. The company should be forced to provide segment financial disclosure. They provide nothing.

    But as a near term short, this is not likely to work. So I personally have a very small position.
    Jul 11, 2013. 01:55 PM | 5 Likes Like |Link to Comment
  • Amazon Fresh: One Guaranteed Winner, But Many Potential Losers  [View article]
    It makes it a crappy market for everyone other than the content owner. But with respect to Amazon, it means this is an expensive and unprofitable market, and not an area where Amazon can pick up subscribers cheaply. Basicly, customer acquisition costs are going up for everyone, but the lifetime value of having those customers is not going up. Pushing Amazon into tougher new markets to find customers, like groceries. This is not good for the intrinsic value of Amazon.
    Jun 20, 2013. 12:20 AM | 2 Likes Like |Link to Comment
  • Do Amazon's Grocery Plans Make Sense?  [View article]
    Good article.

    One comment is something that I have been wondering about "The main competitive advantage Amazon has revolves around its warehouse, distribution, and sales process, which is as streamlined and efficient as you'll find. "

    It is not at all clear to me that Amazon's warehouse and distribution system is in fact more efficient than anyone else's. I think that fact is presumed by the fact that they have spent a fortune building warehouses, and they have a really big footprint. The actual efficiency and long term profitability of this footprint has not been demonstrated. I personally suspect that they are making a huge capital expenditure plan because they can afford it, and then hope to back fill and find demand to support it. We won't know for years whether there will actually be scale efficiencies.

    There are many examples of companies that spend massively on capacity, and then years later discovered they never achieved the scale economics to give a positive ROI, or even scale advantages that gave a competitive advantage.

    The article talks about driving competitors out of business. And thats the key question, will competitors eventually be driven out. In most of Amazon's business, its clear that this will not happen. Walmart, Apple, Google, Target, Ebay-- these companies are not going away.

    Best Buy got hurt, but they aren't going away either-- indeed their stock has nearly doubled and they thus have plenty of access to capital. Its really hard to drive competitors out of business in a society awash in capital.

    Maybe Barnes and Noble/ Borders may disappear, even though thats taken longer than one might have expected. But the ecosystem for digital distribution of books is a special situation. You can't digitally distribute groceries. And even in books, Amazon 's profitability seems to be declining. Even in that core market, the pot at the end of the rainbow is smaller than anyone hoped.

    Jun 6, 2013. 01:45 PM | 9 Likes Like |Link to Comment
  • Apple: It's Time To Move On  [View article]
    Good article mostly. I disagree on the edges. I think the moat is wider and deeper than he thinks. All the current affluent high end users in the US and Europe make the user base critical to developers. And we will likely see new markets and functions that make the moat deeper still. Mobile payments could be a huge area, which promotes customer stickiness and changes the conversation away from device specs and performance.

    As the industry matures, certainly margins come down as you sell to the marginal buyer in asia or whatever. But as long as you do an credible job in those markets, not necessarily dominate them, then the company will be fine. The core user base is a very desirable demographic, composed of power users who push new apps and spend money for media and e commerce. This builds the brand, and that brand remains far more valuable than currently perceived. Right now all the talk is about market share in emerging markets. Thats important, but its not the most important thing unless it becomes an unmitigated asskicking which i think is unlikely. Samsung lacks software and ecosystem strengths. They are actually fairly vulnerable.

    The best part of the article is the reference to Apple being an options story. Amen. Right on brother. Its an unbeleivable place to trade options. As an investor and trader, I see Apple as the Wimbledon of options. Personally, even as apple has declined I have made a small fortune seling puts and selling covered calls.

    The buyback puts a floor in the stock. So you can sell puts and collect the premium and do nicely, with very low risk. You can buy the stock and sell calls against it, as the implied volatility is reasonably high. And all while collecting the dividend and maybe getting uplift from the stock buyback. You can generate a 10 percent yield fairly easily of you pay attention, without taking much risk, and without the stock having to rally. There are so many ways to play and win, its like a big casino where they have said they are going to inject a hundred billion into the table games in the next year. You could still lose, there is certainly not zero risk, but how can you not play in that casino?. I never owned Apple when it was going up. I own it now, mostly so I can sell calls against my stock while being paid a dividend and I watch those options chains constanty. Life is bountiful and kind.

    All of these trading dynamics should push the stock up, even if the margins and market share do come down. Because the range of investible options will attract capital.

    People forget how starved the market is for large liquid volatile situations, at reasonable multiples.
    May 26, 2013. 06:08 AM | 9 Likes Like |Link to Comment
  • Apple Getting Crushed In Most Important Battle  [View article]
    Just so much rehash and apocalyptic arm waving. Apple will have a decent solution for the Asian markets, will capture and retain market share in Asia in the mid to high 20s, will make plenty of money, and will live to fight many more days.

    There will be two long term winning platorms. IOS and Androdid. Several different companies will survive and do well playing in those ecosystems, but Apple will be the most profitable cycle after cycle.

    Apple has the best phones, the best tablets and the best computers. Easiest to use, most reliable, most integrated with each other. Yes, they are high priced, and yes they need to get their price points down. But this will all happen, and they will do fine. The leverage and purchasing power they have over the supply chain is unsurpassed.

    They should not and will not play in the gutter sector with all the schlock Casio wannabes. All this breathless panic is getting so tiresome. I think one of the things that is most overlooked in evaluating consumer tech companies is brand perception for quality, which is very enduring and important over the long term. At any given time in the electronics markets there have been fast growing insurgents who offer low prices. They come and go, and then disappear when they stumble. Building a durable brand takes years of investment and patience.

    As a stock, its a great value. Sure there is risk, but the risk return is more compelling that it ever was. And with the stock buyback acting as a floor, its very sweet.
    May 25, 2013. 01:18 PM | 2 Likes Like |Link to Comment
  • Apple: The Dangers Of Using Bad Data To Calculate Only One Metric  [View article]
    Good article. It was shocking that the silly Trainer analysis got as much airplay as it did.

    Reasonable people can vigorously debate where Apple's margins will go in the long term in the face of intense competition. But when you get bolloxed up looking at a metric like ROIC, then you lose your credibility in contributing to that debate.

    Apple's ecosystem and base of users who have learned that ecosystems provide a cushion against their market becoming one of pure price performance, we just dont know how big a cushion. And Trainor's math game does nothing to illuminate the inquiry.
    May 16, 2013. 08:04 AM | 5 Likes Like |Link to Comment