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Kenneth Lam

Kenneth Lam
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  • Whitney Tilson: Why We Covered Our Netflix Short [View article]
    AS, I share the same view with you on the international market, much smaller size and competition.
    Mar 8 04:51 PM | Likes Like |Link to Comment
  • Whitney Tilson: Why We Covered Our Netflix Short [View article]
    With market value of $11B, for the P/E to drop to 20, net income will have to grow 2.4 times from $160M in 2010 to $550M. Assuming same margin, the number of subscribers will have to increase from 20M now to 68M, which is 90% of the total broadband internet subscribers in US.

    www.leichtmanresearch....
    Mar 7 03:23 PM | 2 Likes Like |Link to Comment
  • JNJ - Johnson & Johnson - Profile, Risk, Opportunity [View instapost]
    I forgot to mention the DePuy recall in the segment of medical device and diagnostics. DePuy's total sales of all its products was around $5B in 2010, 10% of the entire company, with higher margin. A serious reduction of sales can hurt earnings in a meaningful way. However, US sales in medical device actually advanced 1.6% in Q4 vs 2009. In terms of litigation, there are 93,000 individuals who have received the implant and may file a claim. However, only 13% needed a second surgery or 8% above the normal level. Assuming $500K is paid to each of the 8% patients, the company will have to give out $3.7B. This figure is only 2% of the company's current market value of $160B.

    bloomberg.com/news...
    Mar 7 01:19 PM | Likes Like |Link to Comment
  • Why I (Finally) Gave Up on Johnson & Johnson [View article]
    Writing off the asset will be an one-time non-cash charge. The lost sales should not affect the company's value much given that the total operating profit of consumer segment is only 10% of the entire company. However, I forgot to mention the DePuy recall in the segment of medical device and diagnostics. DePuy's total sales of all its products was around $5B in 2010, 10% of the entire company, with higher margin. A serious reduction of sales can hurt earnings in a meaningful way. However, US sales in medical device actually advanced 1.6% in Q4 vs 2009. In terms of litigation, there are 93,000 individuals who have received the implant and may file a claim. However, only 13% needed a second surgery or 8% above the normal level. Assuming $500K is paid to each of the 8% patients, the company will have to give out $3.7B. This figure is only 2% of the company's current market value of $160B.

    www.bloomberg.com/news...
    Mar 7 01:18 PM | 2 Likes Like |Link to Comment
  • Why I (Finally) Gave Up on Johnson & Johnson [View article]
    Profile:
    • Three segments (Consumer, Pharmaceutical, Medical device & diagnostics)
    • Consumer accounts for only 10% of operating profit
    • Pharmaceutical and medical device & diagnostics each accounts for 45% of operating profit
    • 52% revenue outside US

    Risk:
    • Product recalls and suspension of production at McNeil facility in 2010 (resulting in $900M sales reduction, insignificant comparing to $60B worldwide sales)
    • Operational issues call into question the current CEO’s competence
    • Health care reform in US estimated by the company to reduce sales by $500M and impose a fee of $200M in 2011 (insignificant comparing to $13B net income in 2010)
    • Competition from generic drugs for patent expired drugs

    Opportunity:
    • Dividend increased every year (compound annual growth of 13%) since the current CEO took the job in 2002
    • For McNeil situation, alternate supplies of products available in 2nd half of 2011
    • Significant portion of products are protected by patents
    • 2011 sales forecasted to grow by 4%
    • Negatively impacted by McNeil situation, 2010 operating profit still grew by 7%
    • $24B working capital as of 2010 year end
    • High dividend rate (currently 3.6%)
    • More demand from aging population

    Please leave comments!!
    Mar 6 11:45 PM | 1 Like Like |Link to Comment
  • Huge return for JJC put option holders as copper price faces a serious correction in 2011. [View instapost]
    By the way, crisis does happening every week in middle east countries where riots force the government to control commodity prices urgently.
    Feb 20 08:09 PM | Likes Like |Link to Comment
  • Huge return for JJC put option holders as copper price faces a serious correction in 2011. [View instapost]
    Calculated risk, the aggressive part of your portfolio, maybe 3%, split the money to buy two 6 month option for one year total time period, break-even at around 20% drop, $3.5, not pure speculative at all when you looked at how copper dropped from 4 to 1.50 in 2009 in couple months, hope it helps clarify
    Feb 20 07:56 PM | Likes Like |Link to Comment
  • All That Glitters Is Not Gold: Demand, Supply and the Price of Copper (Part III) [View article]
    Every investment idea has its own risk. Investing is about choosing the best risk/return ratio. Imagine you are playing roulette in a casino and you put $10 on red for roughly 50% chance of winning, the house pays you back $30 (rather than $20) if red comes up. You can get really rich if you keep betting red. This becomes not a gamble or speculation anymore.

    Buying options can be the same if the potential return is huge enough to justify the risk. If an option returns 800% with 75% of loss, it is a good investment. For 100% return and 50% risk, it is a speculation.

    To be clear, I am not suggesting to put a big chunk of your portfolio into options.
    Feb 9 02:35 PM | Likes Like |Link to Comment
  • All That Glitters Is Not Gold: Demand, Supply and the Price of Copper (Part III) [View article]
    Real probability of a major pullback in copper price in 2011

    The current price is supported by an estimated supply shortage of 400K tonnes, which is only a fraction of the one-time demand surge (2.5M tonnes) in 2009 from China's massive economic stimulus. A minor slowdown will create a surplus situation.

    Worried about high inflation, Chinese government has already raised both the banks' reserve requirement (record high now) and interest rates numerous times within the last 12 months. Making the matter worse are the inflation-related upheavals in Egypt and Tunisia.

    Read my instablog for more details about why you should allocate a small portion of your portfolio to a put option on JJC (ETN) that could go up 14 times in value when the copper price falls to $2/lb. This is an incredible risk(probability)/reward ratio.
    Feb 8 06:33 PM | 2 Likes Like |Link to Comment
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