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  • ChannelAdvisor Is Again Predicting Further Deceleration For [View article]
    And thats why you have the returns you have. This is a momentum story that has lost its momentum. With no fundamental support below. Ouch.
    May 8, 2013. 08:46 PM | Likes Like |Link to Comment
  • Hot Money Makes Apple #1 Concern Of The Market-Makers [View article]
    This is a great article. It explains why technical pressures and patterns actually work. The fact that only a billion of incremental capital has thus far been injected also suggests that the recent run in apple may peter out, unless more capital is injected soon, or unless Apple itself provides demand through the commencement of market purchases. One one imagine that Apple will modulate those purchases so as not to drive up prices too rapidly, if they behave rationally.

    It raises a host of questions that I find fascinating. First, how can you determine incremental capital accurately and on a daily basis, and how can you determine price expectations, when there are so many market participants? Second, is there a difference in the availability of data about market maker capital committed, vs short term speculative traders, or is their committed liquidity all the same.

    It would be fascinating to see this analysis applied to other broken momentum stocks, particularly Amazon. It is my general sense that it is the next broken momentum story waiting to play out, but I have no real basis for this belief. The fundamentals are deteriorating, but is trading capital being extracted too?
    May 8, 2013. 09:50 AM | Likes Like |Link to Comment
  • IDC's Q1 tablet figures are even gaudier than Strategy Analytics'. the firm thinks shipments soared 142% Y/Y to 49.2M. Strategy estimates "only" 117% growth to 40.6M units. The main reason: IDC thinks Android (GOOG) shipments surged to 27.8M, giving them a 56.5% share; Strategy only estimates 17.6M. The iPad (AAPL) is estimated to have a 39.6% share, down from Q4's 43.6%. Samsung's (SSNLF.PK) share is believed to have risen to 17.9% from 15.1%, and Amazon's (AMZN) to have dropped to 3.7% from 11.5% (shipment timings are a likely factor). Whereas Strategy thinks 3M Windows 8/RT (MSFT) tablets were shipped, IDC estimates only 1.8M (1.6M Win. 8, 200K RT), with 900K involving Surface. [View news story]
    I was struck during the quarter announcement last week about how Amazon has almost stopped talking about Kindle. When you combined that with the dramatic decline in media sales growth reported by Amazon, it suggests that Amazon's core Kindle strategy is in deep trouble as the tablet market cannibalizes the kindle business. It seems that Kindle Fire has proven to be a huge disappointment, as evidently giving product away at no margin is not good enough.
    May 1, 2013. 08:20 PM | 11 Likes Like |Link to Comment
  • Implications Of Apple Guidance [View article]
    Extremely well done. Well thought out, concise, and balanced.

    The market mostly expected and even hoped for terrible June guidance. It doesn't matter very much if Apple earns 6.00, 7.00 or 8.00 in the June quarter. What matters is whether they can defend their competitive position over the long term, or whether its all going to continue to erode. And the answer to that question is not knowable at this point. You can have an opinion, but you can't have confidence in it.

    The stock is a buy at these levels, simply because of cash flow, balance sheet, and the long term option value that they may retain either leadership or a credible duopoly with Android. Because if they do, they are a valuable company and a must own for institutional investors, even if the multiple paid needs to be higher because earnings never return to last years peak.

    The volatility in the stock as reflected in option pricing makes Apple an epic investment opportunity regardless of one's view on the durability of their competitive position. Yesterday you could sell June 380 puts for 14 dollars, and May 430 calls at over 10 dollars. If you own the stock, collect the dividend and also sell calls against your position, you can get a 10 percent yield even if the stock languishes and goes nowhere. This is too compelling to ignore, in a world where everything else is overvalued.

    Thats the beauty of a company with a fortress balance sheet, with substantial cash flow even in a trough, and with at least the potential of a long term grasp on a huge market. There are so many ways to play, and so many ways to win, that you kind of have to play the long side, even if you don't really believe.

    If you really don't believe, you can buy the stock, sell calls near the money, and use the proceeds to buy puts and protect your downside. It still provides decent yield.

    To short it, you have to be almost maniacal. Because you are competing with all these cash flow support structures, and then competing with the company's huge stock purchase program. Its like fighting the Fed when it cranks up the money printing machine. You can win, if you can kick an 70 yard field goal, but its a bad bet.

    Even if you don't like to play with options, thee point is that all these market dynamics mean the stock should have a floor near current prices even if the June quarter really is as bad as they say. Its not like Amazon or Netflix, etc, which are only bought by investors who don't care about math, and which have no defense if they hit the smallest stumble.
    Apr 24, 2013. 12:14 AM | 1 Like Like |Link to Comment
  • Amazon Beats Apple On This 'Buffett-esque' Metric, But It Still Faces Headwinds [View article]
    Its good to have silly articles like this out there. Its part of what creates the wonderful short opportunity on Amazon. I saw those articles a couple weeks ago that tried to tie Buffet's approach to investing to Amazon. The whole point of his value approach is to find companies with a high return on assets and invested capital that can be acquired at reasonable values. Buffet would never in a million years invest in a hyped up momentum stock like Amazon that is run for revenue growth without a profit motive. Never.

    Amazon is a top line momentum story that is running out of top line momentum. Their core competency is to be the price leader in intensely competitive market sectors. Competing with huge companies that have deep balance sheets who can never be driven out of the market. Walmart, Target, Apple, Google, UPS. These companies aren't going away.

    I love the Amazon service. Its the low price provider. As a business, it is horrible. As a stock is among the worst investments that can be found anywhere.
    Mar 21, 2013. 05:04 PM | 3 Likes Like |Link to Comment
  • Amazon Can Improve Margins By Seizing Its Advertising Opportunity [View article]
    Everything that Amazon does is a loss leader. They are running in all directions at the same time, hoping something will stick. Buying share in retailing, in publishing, in video, in tablets and next year in phones. As long as Wall Street treats this an experiment, an adorable speculation, then why not continue. They are in multiple businesses where their competitors and peers trade on legitimate earnings multiples, but Amazon doesn't have to because the company is "thinking long term" and "strategic." That would all be fine if the market share it buys is long term defensible, but its not.

    Look at their peers and competitors. Apple, Fed Ex, Walmart, Target, Google. All are excellent companies that live and breathe for service and for profit. None of them are going anywhere.

    Market share acquired by price cutting is rented not owned. This is a momentum stock. It can do really well, until the music stoops.

    We shall see.....
    Dec 20, 2012. 02:14 PM | Likes Like |Link to Comment
  • Amazon's Smoke And Mirrors Are Fading [View article]
    This stock is a living embodiment of the old joke, We'll make it up on volume. Obviously wall street is so desperate for growth that they will squint at this and pretend. Obviously anyone can grow a business if they are the price leader in sector after sector, and investors give them a permanent hall pass on profits, while holding all the competitors to classic valuation metrics.

    The real question is whether the company can flip the switch at some point and get to attractive margins. And the history suggests the answer is no. They will never be in position where they have driven all viable competitors out of the market o wounded them so badly that they can 't recapture share very quickly.

    Its interesting that Bezos has been successful at convincing investors to be patient and defer profit expectations while he is capturing market share, yet he has been permitted to dump stock in big volumes during this "trust me" period.

    Amazon is very destructive force in American business. Investors are going to be the next group to bear brunt. My guess is this happens in the first half of 2013, once the December quarter is out of the way.
    Dec 19, 2012. 04:13 PM | 5 Likes Like |Link to Comment
  • Slow And Steady Wins The Race - Citigroup Could Now Be A Strong Long-Term Buy [View article]
    Very well done and thought out. I have been selling Citi puts for the last 6 weeks and will do some more. Thanks for your thoughts!
    Aug 21, 2012. 09:34 PM | Likes Like |Link to Comment
  • Slow And Steady Wins The Race - Citigroup Could Now Be A Strong Long-Term Buy [View article]
    Really excellent article.
    Aug 21, 2012. 09:34 PM | Likes Like |Link to Comment