No thoughts on the competitive environment? Here are a couple things worth noting: 1) AMZN is starting to charge sales tax in some jurisdictions. Not sure if the impact will be material but I believe it impacts the competition between AMZN and BBY more than between AMZN and RSH 2) From what I understand, Apple was a real bully on retailer iPhone gross profit, which hurt RSH more than BBY. With iPhone dominance at retail fading in favour of Samsung and others, maybe RSH's phone margins will recover 3) Many companies (BBY Mobile, various carrier stores, kiosks) are encroaching on RSH's turf, cherry-picking the best elements of what RSH does and making that niche hyper-competitive 4) While smarter phones are internalizing more functions (e.g. GPS, iPod functionality, etc) and thus reducing high margin accessory sales, on the other hand maybe increased smart phone power unleashes opportunities for new high margin accessories.
While I appreciate the financial analysis, believing in a path forward in my mind is a matter of understanding how the marketplace is evolving. One thing I wish I could see is RSH's performance in covered malls versus strip malls. I believe covered malls facilitate more impulse sales whereas in a strip mall RSH has to be a destination.
RadioShack Is A Cigar Butt: It Has A Niche, If It Wants It [View article]
I heard Apple really squeezed merchants on margin and because those phones have been so popular in the US for the last couple of years, it really hurt margins. Do you think that will improve as Samsung, etc. have more market share in the US and Apple has less? Presumably Samsung, RIM, Motorola, etc. give the retailer better margins than Apple does.
Also, I wondered about the impact of possible termination of phone subsidies. The big boys haven't done it yet but small competitors have. The impact would presumable freeze high end unit sales.
Does Intel Have A Mobile Strategy? Judge For Yourself [View article]
Interesting is the lack of discussion on the Apple/Samsung frienemy situation. I always thought it weird to cooperate on one basis and compete on another. Given the extent of patent lawsuits between these two, there must be a ton of friction and Apple must be looking for better options. it would seem an Apple decision to work with Intel (at least partially, to fire a shot across Samsung's bow) might come down to more than simply chip price and power consumption. Combine that with the idea that there are few other options for Apple (TSMC capacity supposedly spoken for) and an Apple/Intel relationship of some sort seems very plausible. Of course, even though an Apple win for Intel might be a nice marketing coup, it seems that for global market share, involvement in lower end products, like those from Lenovo, is more critical. Hmmm.
Intel (INTC) is working on a foundry partnership with Cisco (CSCO) in which the former would manufacture the latter's custom processors, Piper reports. The firm thinks the deal could represent a $1B/year opportunity. Intel entered the foundry market earlier this year, betting its huge resources and cutting-edge manufacturing processes would make it a worthy rival to the likes of TSM and UMC. But its customer wins have thus far been limited. [View news story]
Yeah, I guess to the extent it is just used to absorb excess capacity (which is already a sunk cost) at positive cash flows, I can see your point. That should in fact improved ROEs. I just hope that the overall capacity management strategy (i.e. scheduling of rampups of new plants and mothballing old ones) is driven by trying to match the IDM business as much as possible, not the foundry business.
Intel (INTC) is working on a foundry partnership with Cisco (CSCO) in which the former would manufacture the latter's custom processors, Piper reports. The firm thinks the deal could represent a $1B/year opportunity. Intel entered the foundry market earlier this year, betting its huge resources and cutting-edge manufacturing processes would make it a worthy rival to the likes of TSM and UMC. But its customer wins have thus far been limited. [View news story]
I'm still scratching my head as to how I should interpret this - good or bad. On the bad side, instinct tells me the foundry business is a lot less appealing than the IDM business. On the good side, to the extent that INTC soaks up more industry capacity, it extends its scale versus competitors, making it harder for them to continually reinvest at INTC's pace. Also on the good side, diversifying fab capacity utilization to more varied end markets could improve the stability of fab utilization. Hmmm. My verdict is still out. Thoughts?
Retirees Don't Need Income, They Need Spending Money [View article]
Hmmmm. Never thought of this as really anti. When I think about places, industries, etc. in which to invest I think about the political-economic environment and how it impacts the investments. In some countries and industries startups face unbeatable odds against big entrenched incumbents. In other instances small caps have more of a chance to do well. I have had investment success where political interference was minimal and also, by aligning with the politics, have had success where it was all about politics and the legal structures.
Retirees Don't Need Income, They Need Spending Money [View article]
In first year economics, they teach about the balance of supply and demand, lots of buyers and suppliers, etc. Everything somehow finds a balance. The normal BS you have to learn to start out and build an economics foundation. Then by fourth year they start to introduce concepts like natural monopolies, network effects, collusion, etc. just to give you a taste of the real world. I fear there is a lot to be learned here. When people talk about successful wealth creation and attribute it to capitalism, they must, in my mind not forget a couple more ingredients: what's commonly known as Rule of Law and furthermore, laws restricting anti-competitive situations like monopolies and monopsonies, and separation of Church and State and oh yeah maybe Business, too! Without that, capitalism is a mugg's game and some of us are going to be the patsies.
Retirees Don't Need Income, They Need Spending Money [View article]
Yes, I admit "high yield" is a bit ambiguous. First of all, in testing his screens, O'Shaughnessy found that the highest yielders were distressed businesses that did not fare well. I believe he had better luck looking at the 8th or 9th decile of yielders rather than the absolute worst.
Secondly, I should clarify that there are businesses that have a long history of being a high yielders, rather than simply being a momentary high yielder due to current circumstances. Those are the ones I consider to have a wide moat.
Finally, and this might relate to your mREIT comment, there are businesses that are consistently high yielders but still are able to plow back money into the business. In some businesses this would show up on the payout ratio or plowback ratio, indicative of the capital they are reinvesting in the businesses but in some businesses, where the value really comes from intangibles like brands, patents, etc. the plowback is somewhat invisible because it is showing up in SG&A rather than as a capital expenditure.
Retirees Don't Need Income, They Need Spending Money [View article]
Wow! Some wicked thoughts.
First of all, I have a different take on the notion that fixed income by definition reduces portfolio return. Some people think that to achieve maximum return you must be 100% in equities. They think that fixed income purely reduces returns. I beg to differ. If a somewhat balanced portfolio implies rebalancing when it gets out of balance (either triggered by time frame, or weighting factors) than evidence shows that a portfolio with some fixed income can actually outperform an all-equity portfolio, particularly in times of flat but volatile markets, because the rebalancing essentially forces the investor to buy low and sell high.
Secondly, any person with a notion of basing a strategy on 2- or even 10-year results should read O'Shaughnessy's "What Works on Wall Street" where he talks about what constitutes a credible long term track record. Sorry, but 10 years just doesn't buy it.
Thirdly, If you don't believe in the difference between dividend and capital gains income, you better read a little from Zweig before becoming just another lamb to the slaughter. I think the point is that some people think high yielders are companies who have no growth options so they must return cash. Not true. That is a false interpretation. In reality, high yielders are companies with such high and stable ROEs that they can return substantial (and growing) dividends, and still at the same time grow the value of equity. These are truly the elite businesses.
Fourthly, I know a lot of people were deluded into thinking they were making great returns in the era of 5% interest with 3% inflation. I'm sorry but after tax they were making absolute zilch real return. It's just the nominal numbers that looked good. People just didn't understand inflation. In fact, if bond yields maintain their spread over inflation (not quite the case at the moment, but bear with me) - if their spread over inflation is the same, then investors do better in a low inflation environment because in the past you were getting taxed on inflation whereas in the present you are not (since it isn't there)
Fifthly, some people seem to think this is an Obama/Bush, etc. political phenomenon. The USA is not the centre of the universe to the extent they may think, and the problems are global. I hesitate to identify the current US federal regime or the Bush regime as the core of the problem. That, to me, is miopic.
Sixthly, covered calls? That scares me right now. There was a time, I believe, when covered calls were mispriced. The old adage was ""fools buy options, smart investors sell them." In recent times every ETF and equity mutual fund in existence seems to have expanded their scope to include writing covered calls. It has become the vogue thing to do. I can't help but believe that the market has, or soon will, become imbalanced on the opposite side. There are now more writers than buyers, potentially pushing the supply/demand imbalance for calls the opposite way, especially for index calls. Buyer beware!
Finally, investors make the best money when they provide capital to a market where capital is scarce. Unfortunately, despite many people's fears right now, I don't sense capital is scarce in US public equities. Many companies are flush with cash and the S&P is fairly fully priced. If I were thinking about how to make a decent return, I would be looking for places where capital is scarce right now and in general, that does not seem to be in public US equities, broadly speaking!
Understanding Why Warren Buffett Sold Intel [View article]
While Intel's R&D scale is impressive, I hate to equate scale to quality of R&D. I think of quality as a combination of scale and R&D department corporate culture plus excellent hiring in the R&D department. Then when it comes to successful outcomes, a little luck goes a long way too. I think luck and culture may be what make big R&D teams vulnerable (although I don't deny the deck is stacked in their favor). There's always the chance (risk) they can be upstaged.
As for fab expertise, don't forget that they buy the equipment off the shelf from others. It's really the likes of ASML that have the expertise. What Intel has is very certain massive future volumes that allow it to speculate in the new fab development where others couldn't (and even allow it to invest in bleeding edge fab eqpt development as in the recent ASML stake purchased). It would be interesting to know if there is any initial exclusivity to the equipment that Intel, Samsung, and TSMC have negotiated as part of the equity stakes they purchased in ASML.
Intel (INTC) is pursuing a guerrilla approach to the smartphone processor market, striking deals with carriers and low-end Android OEMs (often in emerging markets) to grab share from the ARM-based (ARMH) processors that dominate the space. The latest example is a deal with Russian carrier MegaFon, which will use an Intel Medfield processor to offer a private-label phone. Intel has already struck smartphone deals with Motorola, China's Lenovo and ZTE, India's Lava, and French carrier Orange. [View news story]
Interesting to watch Intel's level of success in mobile to ensure the stock's not a value trap.
Squeeze Potential? The Top 3 Most Shorted Industries [View article]
I guess this is the level of detail I was referring to:
"NASDAQ's latest dissemination date was August 24, 2012 based on positions settled as of August 15, 2012"
That is if you are taking the info from the NASDAQ publication. I believe Bloomberg has more recent "estimated" data and shortsqueeze.com claims to release the data 1-3 days before NASDAQ, presumably because they simply process the filings quicker.
Good work nonetheless. I never really thought of looking at short positions on an industry basis rather than a purely company basis.
When will corporate spending turn? Frustrated. We can see the cash piling up on corporations' books, but not yet being spent in Staples' stores. I'm watching the consumer sentiment for a trigger to growing comfort on the part of corporations to reinvest in their businesses.
Will RadioShack End Up Like Circuit City? [View article]
Great thoughts. Looking at operations, I'm surprised that it seems RSH, and retailers in general, do nothing to try to differentiate their mobility offerings from one another. That's what merchandising is all about but all the competitors seem intent on stripping down the product to the bare bones and then duking it out on price. There is no bundling going on at all, from what I see at RSH, BBY, and others. Without addressing that, it seems their only options are to compete through operational cost minimization, which is a really tough game to play when you are using high priced prime retail space. Maybe they need a vending machine where somebody can buy a cell phone through self-service.
You'd Best Buy Radio Shack [View article]
1) AMZN is starting to charge sales tax in some jurisdictions. Not sure if the impact will be material but I believe it impacts the competition between AMZN and BBY more than between AMZN and RSH
2) From what I understand, Apple was a real bully on retailer iPhone gross profit, which hurt RSH more than BBY. With iPhone dominance at retail fading in favour of Samsung and others, maybe RSH's phone margins will recover
3) Many companies (BBY Mobile, various carrier stores, kiosks) are encroaching on RSH's turf, cherry-picking the best elements of what RSH does and making that niche hyper-competitive
4) While smarter phones are internalizing more functions (e.g. GPS, iPod functionality, etc) and thus reducing high margin accessory sales, on the other hand maybe increased smart phone power unleashes opportunities for new high margin accessories.
While I appreciate the financial analysis, believing in a path forward in my mind is a matter of understanding how the marketplace is evolving. One thing I wish I could see is RSH's performance in covered malls versus strip malls. I believe covered malls facilitate more impulse sales whereas in a strip mall RSH has to be a destination.
RadioShack Is A Cigar Butt: It Has A Niche, If It Wants It [View article]
Also, I wondered about the impact of possible termination of phone subsidies. The big boys haven't done it yet but small competitors have. The impact would presumable freeze high end unit sales.
Does Intel Have A Mobile Strategy? Judge For Yourself [View article]
Intel (INTC) is working on a foundry partnership with Cisco (CSCO) in which the former would manufacture the latter's custom processors, Piper reports. The firm thinks the deal could represent a $1B/year opportunity. Intel entered the foundry market earlier this year, betting its huge resources and cutting-edge manufacturing processes would make it a worthy rival to the likes of TSM and UMC. But its customer wins have thus far been limited. [View news story]
Intel (INTC) is working on a foundry partnership with Cisco (CSCO) in which the former would manufacture the latter's custom processors, Piper reports. The firm thinks the deal could represent a $1B/year opportunity. Intel entered the foundry market earlier this year, betting its huge resources and cutting-edge manufacturing processes would make it a worthy rival to the likes of TSM and UMC. But its customer wins have thus far been limited. [View news story]
Retirees Don't Need Income, They Need Spending Money [View article]
Retirees Don't Need Income, They Need Spending Money [View article]
Retirees Don't Need Income, They Need Spending Money [View article]
Secondly, I should clarify that there are businesses that have a long history of being a high yielders, rather than simply being a momentary high yielder due to current circumstances. Those are the ones I consider to have a wide moat.
Finally, and this might relate to your mREIT comment, there are businesses that are consistently high yielders but still are able to plow back money into the business. In some businesses this would show up on the payout ratio or plowback ratio, indicative of the capital they are reinvesting in the businesses but in some businesses, where the value really comes from intangibles like brands, patents, etc. the plowback is somewhat invisible because it is showing up in SG&A rather than as a capital expenditure.
Retirees Don't Need Income, They Need Spending Money [View article]
First of all, I have a different take on the notion that fixed income by definition reduces portfolio return. Some people think that to achieve maximum return you must be 100% in equities. They think that fixed income purely reduces returns. I beg to differ. If a somewhat balanced portfolio implies rebalancing when it gets out of balance (either triggered by time frame, or weighting factors) than evidence shows that a portfolio with some fixed income can actually outperform an all-equity portfolio, particularly in times of flat but volatile markets, because the rebalancing essentially forces the investor to buy low and sell high.
Secondly, any person with a notion of basing a strategy on 2- or even 10-year results should read O'Shaughnessy's "What Works on Wall Street" where he talks about what constitutes a credible long term track record. Sorry, but 10 years just doesn't buy it.
Thirdly, If you don't believe in the difference between dividend and capital gains income, you better read a little from Zweig before becoming just another lamb to the slaughter. I think the point is that some people think high yielders are companies who have no growth options so they must return cash. Not true. That is a false interpretation. In reality, high yielders are companies with such high and stable ROEs that they can return substantial (and growing) dividends, and still at the same time grow the value of equity. These are truly the elite businesses.
Fourthly, I know a lot of people were deluded into thinking they were making great returns in the era of 5% interest with 3% inflation. I'm sorry but after tax they were making absolute zilch real return. It's just the nominal numbers that looked good. People just didn't understand inflation. In fact, if bond yields maintain their spread over inflation (not quite the case at the moment, but bear with me) - if their spread over inflation is the same, then investors do better in a low inflation environment because in the past you were getting taxed on inflation whereas in the present you are not (since it isn't there)
Fifthly, some people seem to think this is an Obama/Bush, etc. political phenomenon. The USA is not the centre of the universe to the extent they may think, and the problems are global. I hesitate to identify the current US federal regime or the Bush regime as the core of the problem. That, to me, is miopic.
Sixthly, covered calls? That scares me right now. There was a time, I believe, when covered calls were mispriced. The old adage was ""fools buy options, smart investors sell them." In recent times every ETF and equity mutual fund in existence seems to have expanded their scope to include writing covered calls. It has become the vogue thing to do. I can't help but believe that the market has, or soon will, become imbalanced on the opposite side. There are now more writers than buyers, potentially pushing the supply/demand imbalance for calls the opposite way, especially for index calls. Buyer beware!
Finally, investors make the best money when they provide capital to a market where capital is scarce. Unfortunately, despite many people's fears right now, I don't sense capital is scarce in US public equities. Many companies are flush with cash and the S&P is fairly fully priced. If I were thinking about how to make a decent return, I would be looking for places where capital is scarce right now and in general, that does not seem to be in public US equities, broadly speaking!
Happy Hunting!
Understanding Why Warren Buffett Sold Intel [View article]
As for fab expertise, don't forget that they buy the equipment off the shelf from others. It's really the likes of ASML that have the expertise. What Intel has is very certain massive future volumes that allow it to speculate in the new fab development where others couldn't (and even allow it to invest in bleeding edge fab eqpt development as in the recent ASML stake purchased). It would be interesting to know if there is any initial exclusivity to the equipment that Intel, Samsung, and TSMC have negotiated as part of the equity stakes they purchased in ASML.
Intel (INTC) is pursuing a guerrilla approach to the smartphone processor market, striking deals with carriers and low-end Android OEMs (often in emerging markets) to grab share from the ARM-based (ARMH) processors that dominate the space. The latest example is a deal with Russian carrier MegaFon, which will use an Intel Medfield processor to offer a private-label phone. Intel has already struck smartphone deals with Motorola, China's Lenovo and ZTE, India's Lava, and French carrier Orange. [View news story]
Squeeze Potential? The Top 3 Most Shorted Industries [View article]
"NASDAQ's latest dissemination date was August 24, 2012 based on positions settled as of August 15, 2012"
That is if you are taking the info from the NASDAQ publication. I believe Bloomberg has more recent "estimated" data and shortsqueeze.com claims to release the data 1-3 days before NASDAQ, presumably because they simply process the filings quicker.
Good work nonetheless. I never really thought of looking at short positions on an industry basis rather than a purely company basis.
I'll Be A Buyer Of SPLS Today [View instapost]
Squeeze Potential? The Top 3 Most Shorted Industries [View article]
Will RadioShack End Up Like Circuit City? [View article]