Stephen Castellano's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.com/user/528627/comments http://seekingalpha.com/article/269259/comments?source=feed#comment-1803957 1803957
The impact to $MSFT now has a more positive bias following July 6 announcement Facebook is integrating Skype.

www.scribd.com/doc/579...]]> Tue, 02 Aug 2011 18:40:09 -0400
The impact to $MSFT now has a more positive bias following July 6 announcement Facebook is integrating Skype.

www.scribd.com/doc/579...]]> http://seekingalpha.com/article/276500/comments?source=feed#comment-1729669 1729669 Sun, 26 Jun 2011 17:43:18 -0400 http://seekingalpha.com/article/276500/comments?source=feed#comment-1726844 1726844 Fri, 24 Jun 2011 14:42:25 -0400 http://seekingalpha.com/article/269259/comments?source=feed#comment-1645429 1645429
A deeper study reveals a more positive view on Skype though it doesn't change my original, quickly drawn conclusion.

In 2010 Skype had gross margins of 52%, and an Operating Margin excluding amortization of intangibles of 34.8%. Assuming no cash taxes paid, Earnings Before Interest After Taxes (EBIAT) was $21m. Adjusting by +$161m for depreciation and amortization of intangibles, -$35m for capital spending and assuming a +$11m adjusted working capital benefit gets you to a recurring free cash flow figure of +$157m.

Using that as a base one can extrapolate growth rate and synergy assumptions -- still, if you are conservative you will not get much of an incrementally positive impact to MSFT.

Applying optimistic assumptions you start getting some interesting values. Even assigning a low-probability to realizing some optimistic scenario improves MSFT's valuation potential because the worst-case just is not that bad.

Would note, MSFT was probably able to "overpay" for this acquisition because it will probably be able to realize synergies in a way that Google, Facebook and others would not be able to.

I elaborate on all of this in a detailed report supported by detailed models; it should soon be available via a technology research firm that serves institutional investors, corporate marketing and strategy departments. ]]> Wed, 11 May 2011 22:57:11 -0400
A deeper study reveals a more positive view on Skype though it doesn't change my original, quickly drawn conclusion.

In 2010 Skype had gross margins of 52%, and an Operating Margin excluding amortization of intangibles of 34.8%. Assuming no cash taxes paid, Earnings Before Interest After Taxes (EBIAT) was $21m. Adjusting by +$161m for depreciation and amortization of intangibles, -$35m for capital spending and assuming a +$11m adjusted working capital benefit gets you to a recurring free cash flow figure of +$157m.

Using that as a base one can extrapolate growth rate and synergy assumptions -- still, if you are conservative you will not get much of an incrementally positive impact to MSFT.

Applying optimistic assumptions you start getting some interesting values. Even assigning a low-probability to realizing some optimistic scenario improves MSFT's valuation potential because the worst-case just is not that bad.

Would note, MSFT was probably able to "overpay" for this acquisition because it will probably be able to realize synergies in a way that Google, Facebook and others would not be able to.

I elaborate on all of this in a detailed report supported by detailed models; it should soon be available via a technology research firm that serves institutional investors, corporate marketing and strategy departments. ]]> http://seekingalpha.com/article/269259/comments?source=feed#comment-1644047 1644047
I suppose if I were a large-cap institutional portfolio manager that already owns MSFT, I would be happy with this Skype acquisition. The key question for that fellow would be -- what is the risk to the MSFT stock price? There is little if any.

Since I do not tie my investments to arbitrary market cap or investment styles (that is not completely true -- I do focus on $2.5b+ market cap companies that demonstrate strong growth and a reasonable price -- GARP), I am finding plenty of relatively better ideas than MSFT out there. In the Tech sector for example, there are still a few semiconductor companies I still like, though no software companies. ]]> Wed, 11 May 2011 12:28:35 -0400
I suppose if I were a large-cap institutional portfolio manager that already owns MSFT, I would be happy with this Skype acquisition. The key question for that fellow would be -- what is the risk to the MSFT stock price? There is little if any.

Since I do not tie my investments to arbitrary market cap or investment styles (that is not completely true -- I do focus on $2.5b+ market cap companies that demonstrate strong growth and a reasonable price -- GARP), I am finding plenty of relatively better ideas than MSFT out there. In the Tech sector for example, there are still a few semiconductor companies I still like, though no software companies. ]]> http://seekingalpha.com/article/261957/comments?source=feed#comment-1573566 1573566
NSM deal may be an insurance policy. Perhaps there is a new product line TXN is involved with and it believes there is a recently heightened level of probability it may fail.

For example, now in retrospect its pretty clear to me that Intel should have bought NVIDIA in the summer of 2008 even if for 2x value, but it ended delaying/under-delivering its multicore integrated GPU chip and recently paying NVDA for infringed patents.

Then again perhaps I am giving TXN too much potential credit. It will be interesting to see how the merged company does for sure.

Meanwhile, a lot of semis still look very attractive to me since they may be already embedding a near-term peak in the cycle, and there is a better chance than not that the cycle may be extended due to a "surprisingly" improving economy and growth in new product lines (tablets, smart phones).

I also think fears of a glut in tablets is overblown in that it may be more of a problem for the product manufacturers than for the semi companies themselves. ]]> Wed, 06 Apr 2011 12:10:37 -0400
NSM deal may be an insurance policy. Perhaps there is a new product line TXN is involved with and it believes there is a recently heightened level of probability it may fail.

For example, now in retrospect its pretty clear to me that Intel should have bought NVIDIA in the summer of 2008 even if for 2x value, but it ended delaying/under-delivering its multicore integrated GPU chip and recently paying NVDA for infringed patents.

Then again perhaps I am giving TXN too much potential credit. It will be interesting to see how the merged company does for sure.

Meanwhile, a lot of semis still look very attractive to me since they may be already embedding a near-term peak in the cycle, and there is a better chance than not that the cycle may be extended due to a "surprisingly" improving economy and growth in new product lines (tablets, smart phones).

I also think fears of a glut in tablets is overblown in that it may be more of a problem for the product manufacturers than for the semi companies themselves. ]]> http://seekingalpha.com/currents/post/64826?source=feed#comment-1385472 1385472 Mon, 03 Jan 2011 14:31:15 -0500 http://seekingalpha.com/article/242949/comments?source=feed#comment-1384695 1384695 ascenderellc.com/2010/.../]]> Mon, 03 Jan 2011 08:33:50 -0500 ascenderellc.com/2010/.../]]> http://seekingalpha.com/article/242949/comments?source=feed#comment-1384661 1384661 covestor.com/ascendere... I've also recently began experimenting with posting a few of my live trading updates on StockTwits: stocktwits.com/steve_a...]]> Mon, 03 Jan 2011 08:07:30 -0500 covestor.com/ascendere... I've also recently began experimenting with posting a few of my live trading updates on StockTwits: stocktwits.com/steve_a...]]> http://seekingalpha.com/article/241100/comments?source=feed#comment-1345959 1345959
The reason the models I developed sometimes seem like they have the effect of Nostradamus in predicting future major sell side upgrades of individual stocks is because the models are based on a key fundamental tenet of of finance -- that cash flow growth and ROIC drive any asset's valuation. Strangely, basic fundamental stock picking done in a systematic fashion still works in a market that is driven by large and extremely sophisticated quantitative asset managers. Or maybe because of that. ]]> Fri, 10 Dec 2010 08:14:48 -0500
The reason the models I developed sometimes seem like they have the effect of Nostradamus in predicting future major sell side upgrades of individual stocks is because the models are based on a key fundamental tenet of of finance -- that cash flow growth and ROIC drive any asset's valuation. Strangely, basic fundamental stock picking done in a systematic fashion still works in a market that is driven by large and extremely sophisticated quantitative asset managers. Or maybe because of that. ]]> http://seekingalpha.com/article/240434/comments?source=feed#comment-1340730 1340730
We do not necessarily need employment growth to drive these key factors higher, but companies will likely start hiring to sustain this upward trajectory as comps get more difficult.

Of the names on your list, I like $TRW and $AVT a lot -- they represent 2 of 22 stocks I currently hold in a model portfolio based on real trade data: covestor.com/ascendere... ]]> Tue, 07 Dec 2010 12:31:55 -0500
We do not necessarily need employment growth to drive these key factors higher, but companies will likely start hiring to sustain this upward trajectory as comps get more difficult.

Of the names on your list, I like $TRW and $AVT a lot -- they represent 2 of 22 stocks I currently hold in a model portfolio based on real trade data: covestor.com/ascendere... ]]> http://seekingalpha.com/currents/post/62561?source=feed#comment-1336755 1336755 Sat, 04 Dec 2010 18:44:02 -0500 http://seekingalpha.com/currents/post/61973?source=feed#comment-1326606 1326606 Sun, 28 Nov 2010 22:22:47 -0500 http://seekingalpha.com/article/238079/comments?source=feed#comment-1319796 1319796 www.nysscpa.org/cpajou...

Personally, I focus on 4 key factors, which are summaries of numerous other factors -- 1) relative value; 2) operating momentum; 3) analyst revision momentum; and 4) fundamental quality. You can view a related model portfolio based on real trade data here: covestor.com/ascendere...

Interesting that we both rate TSN and FCX highly, but have a different view on ADBE. ]]> Tue, 23 Nov 2010 09:10:39 -0500 www.nysscpa.org/cpajou...

Personally, I focus on 4 key factors, which are summaries of numerous other factors -- 1) relative value; 2) operating momentum; 3) analyst revision momentum; and 4) fundamental quality. You can view a related model portfolio based on real trade data here: covestor.com/ascendere...

Interesting that we both rate TSN and FCX highly, but have a different view on ADBE. ]]> http://seekingalpha.com/article/237500/comments?source=feed#comment-1317555 1317555 news.google.com/news/s...

From this Fortune article, it seems that some investors are actually stepping up buying of municipal bonds right now: finance.fortune.cnn.co.../

AGO continues to improve ROE and it is trading at 0.7x book value, and I think much less based on tangible book value. If municipal bond Armageddon is not on the table, this could be a great idea.

Having said that, I do own AGO in a model portfolio that turns over every month covestor.com/ascendere..., and I'm thinking of replacing it simply because I have since found a few relatively better shorter-term ideas. Maybe something like the private equity firm with public stock Ares Capital (ARCC), which is a good swap idea given the similar market cap size and other attributes. ]]> Sun, 21 Nov 2010 22:23:02 -0500 news.google.com/news/s...

From this Fortune article, it seems that some investors are actually stepping up buying of municipal bonds right now: finance.fortune.cnn.co.../

AGO continues to improve ROE and it is trading at 0.7x book value, and I think much less based on tangible book value. If municipal bond Armageddon is not on the table, this could be a great idea.

Having said that, I do own AGO in a model portfolio that turns over every month covestor.com/ascendere..., and I'm thinking of replacing it simply because I have since found a few relatively better shorter-term ideas. Maybe something like the private equity firm with public stock Ares Capital (ARCC), which is a good swap idea given the similar market cap size and other attributes. ]]> http://seekingalpha.com/article/237996/comments?source=feed#comment-1317416 1317416 www.nytimes.com/2010/1...]]> Sun, 21 Nov 2010 19:48:20 -0500 www.nytimes.com/2010/1...]]> http://seekingalpha.com/article/237987/comments?source=feed#comment-1317090 1317090 covestor.com/ascendere...

Not sure the same thing applies in venture capital. I guess you could choose a baseline investment figure like 6-7 companies a year, and if the market average deviates by some extreme ratio you can decreases/increase number of investments by 1-2 companies. By slightly changing the level of investment at times of extreme conditions, you might be able to improve returns a bit and not hurt yourself too much if you are wrong. ]]> Sun, 21 Nov 2010 14:39:54 -0500 covestor.com/ascendere...

Not sure the same thing applies in venture capital. I guess you could choose a baseline investment figure like 6-7 companies a year, and if the market average deviates by some extreme ratio you can decreases/increase number of investments by 1-2 companies. By slightly changing the level of investment at times of extreme conditions, you might be able to improve returns a bit and not hurt yourself too much if you are wrong. ]]> http://seekingalpha.com/article/226016/comments?source=feed#comment-1310175 1310175 live.covestor.com/2010...


These numbers work well at identifying potential long-term holding candidates, and especially well in the context of helping choose stocks for an ~22 stock portfolio that is rebalanced monthly (here is a model portfolio based on real trade data that can be mirrored: covestor.com/ascendere...).

I have at times do post detailed fundamental analysis of stocks for free on this website and elsewhere (see the reports below on SBUX, JOYG, MCK), but lately I haven't had time as I have been focused on revenue generating projects. Those interested in hiring me on a consulting basis to generate detailed valuation studies of any particular stock, please contact me directly.

www.scribd.com/doc/283...

www.scribd.com/doc/283...

www.scribd.com/doc/283...]]> Tue, 16 Nov 2010 21:15:43 -0500 live.covestor.com/2010...


These numbers work well at identifying potential long-term holding candidates, and especially well in the context of helping choose stocks for an ~22 stock portfolio that is rebalanced monthly (here is a model portfolio based on real trade data that can be mirrored: covestor.com/ascendere...).

I have at times do post detailed fundamental analysis of stocks for free on this website and elsewhere (see the reports below on SBUX, JOYG, MCK), but lately I haven't had time as I have been focused on revenue generating projects. Those interested in hiring me on a consulting basis to generate detailed valuation studies of any particular stock, please contact me directly.

www.scribd.com/doc/283...

www.scribd.com/doc/283...

www.scribd.com/doc/283...]]> http://seekingalpha.com/article/236029/comments?source=feed#comment-1299734 1299734 covestor.com/ascendere...]]> Wed, 10 Nov 2010 11:02:42 -0500 covestor.com/ascendere...]]> http://seekingalpha.com/article/235445/comments?source=feed#comment-1297645 1297645 Tue, 09 Nov 2010 10:37:24 -0500 http://seekingalpha.com/article/234841/comments?source=feed#comment-1291122 1291122 covestor.com/ascendere...]]> Thu, 04 Nov 2010 20:46:50 -0400 covestor.com/ascendere...]]> http://seekingalpha.com/article/230095/comments?source=feed#comment-1257396 1257396 www.cnbc.com/id/39672578]]> Thu, 14 Oct 2010 14:39:39 -0400 www.cnbc.com/id/39672578]]> http://seekingalpha.com/article/229363/comments?source=feed#comment-1253499 1253499 ROIC). To a large extent, these simple factors tell a story of their own. You can't have solid cash flow and ROIC without a demand -- that's a priori, a fact without question. In my opinion, anecdotes, without putting them in a carefully modeled context that allows for a methodical and flexible scenario analysis, are just noise and used by too many investors to justify a decision they were going to make anyway.

I've spent years following a few companies in minute detail -- and yes, there is a benefit to that. Maybe once a year, that specialized knowledge will provide you with a temporary edge that no else has. 3000 hours to get to that complete mosaic. But if you are not putting in that kind of time, I do think anecdotes can be more detrimental than helpful.

Now, since I cover 2000+ companies instead of 10, instead of looking for a big homerun, I just look for consistent singles and what works on average most of the time. It's a difficult process to market -- kind of boring and doesn't sound complicated to many people enough -- but it does quite well.

Good recent example I suppose is CIT Group (CIT). This was added to my portfolio on Oct 1, and it was written up positively in Barron's on Oct 9. The detail of the Barron's article was secondary to what I focus on -- cash flow growth and ROIC. ]]> Tue, 12 Oct 2010 14:15:21 -0400 ROIC). To a large extent, these simple factors tell a story of their own. You can't have solid cash flow and ROIC without a demand -- that's a priori, a fact without question. In my opinion, anecdotes, without putting them in a carefully modeled context that allows for a methodical and flexible scenario analysis, are just noise and used by too many investors to justify a decision they were going to make anyway.

I've spent years following a few companies in minute detail -- and yes, there is a benefit to that. Maybe once a year, that specialized knowledge will provide you with a temporary edge that no else has. 3000 hours to get to that complete mosaic. But if you are not putting in that kind of time, I do think anecdotes can be more detrimental than helpful.

Now, since I cover 2000+ companies instead of 10, instead of looking for a big homerun, I just look for consistent singles and what works on average most of the time. It's a difficult process to market -- kind of boring and doesn't sound complicated to many people enough -- but it does quite well.

Good recent example I suppose is CIT Group (CIT). This was added to my portfolio on Oct 1, and it was written up positively in Barron's on Oct 9. The detail of the Barron's article was secondary to what I focus on -- cash flow growth and ROIC. ]]> http://seekingalpha.com/article/229363/comments?source=feed#comment-1251549 1251549 Mon, 11 Oct 2010 12:21:50 -0400 http://seekingalpha.com/article/229363/comments?source=feed#comment-1251482 1251482 Mon, 11 Oct 2010 11:52:48 -0400 http://seekingalpha.com/article/226016/comments?source=feed#comment-1236048 1236048
According to them, "high-quality" generally refers to steady earnings growth, high returns on capital and low debt/equity ratios.

Read the unabridged whitepaper here: www.atlcap.com/default...

From the point of view of my GARP long/short strategy that is rebalanced monthly, I additionally focus on measures of cash flow growth, ROIC, operating momentum and analyst revision momentum. ]]> Thu, 30 Sep 2010 20:41:00 -0400
According to them, "high-quality" generally refers to steady earnings growth, high returns on capital and low debt/equity ratios.

Read the unabridged whitepaper here: www.atlcap.com/default...

From the point of view of my GARP long/short strategy that is rebalanced monthly, I additionally focus on measures of cash flow growth, ROIC, operating momentum and analyst revision momentum. ]]> http://seekingalpha.com/article/225839/comments?source=feed#comment-1216212 1216212 Fri, 17 Sep 2010 22:02:40 -0400 http://seekingalpha.com/instablog/166130-paul-price/83776-value-lines-timeliness-system-time-to-reboot?source=feed#comment-1135460 1135460
For individual stock picking, one good way to use lists like these may be to look for stocks that have recently moved from 5 (worst) to 4 (not as bad). If the macro picture stabilizes or improve slightly, you might see the prices of some of these stocks surging ahead of the recorded fundamentals. ]]> Tue, 27 Jul 2010 15:40:29 -0400
For individual stock picking, one good way to use lists like these may be to look for stocks that have recently moved from 5 (worst) to 4 (not as bad). If the macro picture stabilizes or improve slightly, you might see the prices of some of these stocks surging ahead of the recorded fundamentals. ]]> http://seekingalpha.com/article/210601/comments?source=feed#comment-1075717 1075717 Mon, 21 Jun 2010 09:30:43 -0400 http://seekingalpha.com/article/210118/comments?source=feed#comment-1070742 1070742 Thu, 17 Jun 2010 07:36:09 -0400