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  • Ubiquiti Networks Offers A Compelling Growth Story [View article]
    Sep 16 05:50 AM | Likes Like |Link to Comment
  • Here's Why 8x8, Inc. Is Poised To Outperform [View article]
    It's also worth reading the earnings call transcript, about the advantage they claim in reliability and security, including standards that they imply take a very long time to meet. Also, they say they are focusing investment on mid-market because they get double the return, compared to SMBs.

    What I don't understand though is how 8x8 are not competing with Amazon Web Services and other big cloud providers. If it's because SMB and mid-market customers want cloud and telephony from the same provider, then why don't the cloud giants include competitive telephony. (I've only checked one page for AWS and did not see telephony or VOIP mentioned.) BTW that's not meant to be rhetorical, I'd like to know.
    Sep 14 06:09 PM | Likes Like |Link to Comment
  • When To Sell? Using Short Selling Signals To Derisk Your Portfolio [View article]
    About the M-Socre, the negative coefficients look odd. Beneish expected increased leverage to increase the pressure to manipulate, but increased leverage means LVGI is higher, and its negative coefficient means that the score is lower, which is better (less likely to be a manipulator). SGAI is the other index with a negative coefficient. It measures the change in the SGA expense as a proportion of sales, and the sign of the coefficient also looks odd. It may be that the coefficients accurately reflect the data, and Beneish's expectations were wrong. Another possibility is that the 74 known manipulators from the mid 1990s were not enough to get reliable results. SGAI and LVGI are two of the four indexes which were not judged to be statistically significant. (Some versions of the score only use the four indexes judged to be statistically significant.)

    These links might help anyone who wants to check:

    This is for Beneish's 1999 paper:

    In this 2013 paper by Beneish, Lee and Nichols, it's claimed that a low M-Score predicts share price outperformance:

    Another paper can be found with a search for "Beneish and Nichols, 2005 – 2007"

    It's likely that I'm entirely wrong, as people more qualified than I am ought to have checked the M-Score indexes long ago. If so, the score needs a better explanation than is typically given.

    I blogged about the issue some time ago but the world has not noticed.
    Sep 14 05:12 PM | Likes Like |Link to Comment
  • Atmel: Why This Chipmaker Deserves Your Attention [View article]
    I'm interested in the potential of Atmel's crypto memory. It's mentioned in the earnings call transcript (find "Crypto"), as a kind of emerging opportunity without any specific figures.

    Googling "crypto memory" gets results relating to Atmel, which would be reassuring, except that some of the top results are about cracking it using power analysis, which is described as a fairly basic method. The PDF here claims that a successful attack can be carried out in under 20 minutes on an ordinary laptop. I haven't found the date of the PDF, but it refers to a source dated 2010.

    So, maybe the products are hopelessly insecure, or maybe security has been greatly improved and that's why sales have started to take off.

    The PDF gives more applications for crypto memory than Atmel list (find "printers and printer cartridges" for the start of a list).

    Just some further info, Atmel first used the name "CryptoMemory" in 2002. Power analysis has been used to attack other products (not by Atmel) such as secure FPGAs. Googling "crypto memory" for just the past year only got one result for Atmel out of ten.

    I'd be grateful for more information on the security of Atmel's crypto memory, the size of the market, and if Atmel are likely to have a long lasting competitive advantage in the area.

    I used to own shares in Atmel.
    Sep 14 08:15 AM | Likes Like |Link to Comment
  • Automotive, Tablet Gaming, And Servers Can Power Nvidia Beyond 52-Week Highs [View article]
    I'm just wondering how driverless cars might affect NVDA. I suppose there would be more need for infotainment.

    Off topic (possibly) - Immersive games where passengers defend the car against various threats could combine a gaming experience with some awareness of the journey.
    Sep 6 05:15 PM | Likes Like |Link to Comment
  • Illinois Tool Works Is A Good Stock To Hold [View article]
    I'm fairly sure that as part of the refocusing, ITW said they were looking to acquire businesses with a sustainable high margin. I had the impression that previous acquisitions had been followed by declining margins. It might have been from an earnings call a few quarters ago. If my memory isn't playing tricks on me, they made the point but have not repeated it. There's some risk that the good intentions won't be executed well, but I'm reasonably hopeful that margins on recent and future acquisitions will hold up fairly well.

    Going by Morningstar's figures (from ),

    Revenue ($ millions)
    2013 14,135
    2004 11,731
    which is only 2% CAGR growth.
    The peak of 17,924 was hit in 2012.

    The share count has steadily reduced.
    Revenue per share ($)
    2013 31.48
    2004 19.23
    which is 5.63% CAGR

    If revenue per share continues to grow around 5.6%, that obviously limits the long term growth of metrics like free cash flow per share and dividends. The period includes the financial crisis and the extensive corporate change. I don't see the financial crisis as an excuse for the current revenue per share figure, as it should have been an opportunity for acqisitions at a good price. The corporate change seems likely to have had an effect on revenue per share, but it isn't easy to quantify.

    Any projection from the past depends on which period you believe best represents the future. Revenue growth was much better from 2004 to 2007 (11,731 and 16,171 $million), so looking back nine or ten years gives a better-looking picture than looking back to 2007 or some later years.

    High margins can allow growth in per-share metrics when they produce free cash flow which is used to buy back shares, but that isn't helped when the share price is high.

    I'm actually quite hopeful that the corporate change, 80/20, and the mostly decentralized nature of ITW positions them well for long term growth of the per-share metrics that matter, but that isn't anything I can prove, and the history from 2004 doesn't support it, bearing in mind that revenue is a limiting factor.
    Sep 5 05:26 AM | Likes Like |Link to Comment
  • Berkshire's Outperformance Will Continue To Compress Over Time [View article]
    This is how I put 'growth eventually beats valuation' into math. It depends on certainty, constant growth rates and enough time.

    If an investment of K dollars multiplies in value by x each year, and another investment of one dollar multiplies by y each year, if K is greater than 1 and y >x, then the number of years until both investments have the same value is given by t in:

    K * x^t = y^t

    Solving for t gives:

    t = log(K) / log(y/x)

    Given the assumptions, the smaller but faster growing quantity will overtake the other in a finite time, given by t.

    As an extreme case, a million dollars growing at 7% will eventually be overtaken by one dollar growing at 7.01%.

    t = log (1,000,000) / log (1.0701 / 1.07)
    = 158181.17

    and you'd have to wait 158,182 years for $1 growing at 7.01% to overtake $1,000,000 growing at 7%. Wait another 158,182 years, and the initial relative sizes are reversed.

    A relatively normal case would be:

    t = log(2)/log (1.2 / 1.1)
    = 7.97 years

    which means it would take eight years for one dollar compounding at 20% to be worth more than two dollars compounding at 10%.

    The calculation of the period assumes constant growth, but once it's calculated, the growth only needs to be average, as in CAGR. For example, the "eight years for one dollar compounding at 20%" only needs to multiply by 4.3 times over the period (from 1.2^8 = 4.3), and the growth does not need to be even, for the overtaking to happen in eight years.

    The math applies to any quantity that can grow, including equity. The "one dollar" and "two dollars" in the previous example can correspond to the price of equity being twice as high for the faster grower, so you initially get twice as much equity of the slower grower for the same amount invested. Beyond the overtaking point, the investment in the faster grower represents more equity than the alternative, and assuming that expectations of growth don't switch round, markets would have to be very inefficient to give a lower value to the investment in the faster grower.

    In practice, time and uncertainty can't be ignored, so valuation and various risks matter. There are complications, such as companies that return cash to shareholders and keep very low or negative equity. The math illustrates the principles, but it's hard to put reliable figures into it.
    Sep 2 10:01 PM | 1 Like Like |Link to Comment
  • The Female Health Company: Misunderstanding Leads To Undervaluation [View article]
    "These loss carry forwards will mitigate future taxes and allow for more revenue to flow through to the bottom line"

    No it won't. It will benefit cash flow, but not net income. I said it wouldn't well before the latest results, and now it's confirmed.
    Aug 26 01:57 PM | 1 Like Like |Link to Comment
  • Markel Corp. Willing To Go Places Berkshire Hathaway Is Not? [View article]
    Thanks for the reply. It prompted me to do a little research, but my problem with Google is still that factors I don't know about make prediction difficult. The search term "ad blocker" has been trending up recently. If I guess that most users don't care if they see Google adverts or not, the effect of more use of ad blockers is hard to predict. I don't know if it's easier to write ad blockers that only target aggressive adverts, or ad blockers that block most or all adverts. (I would rather there were no aggressive adverts on the internet, so no blockers were needed.)

    I found "AdBlock Plus sued by German marketing companies" by Petrovic, Jul 8, 2014, (
    but the legal action might only be possible because companies could pay to be on a 'whitelist' and avoid having their adverts blocked. Google are reported to have paid.

    This mentions Google's "Active View", which allows advertisers to only pay when adverts are viewable:
    "Google grabs to combat ad fraud" by Serdar Yegulalp, February 21, 2014 (
    Although this is about Facebook, it confirms that "viewable impressions" may be the answer to click-fraud.
    "What declining reach, rising click fraud, & skyrocketing prices mean for Facebook advertisers"
    I can't assume that fraudsters will be held back by viewable impressions or Google's "Active View" for long.

    About Google:
    "The growth potential is also somewhat limited given its size. " - Mingran Wang
    Google are certainly big, and it's often said that "Trees don't grow to the sky". IMO there is big potential with artificial Intelligence and quantum computing, but the big potential is speculative and not imminent, and this might not be the place to discuss it. Anyone interested could start with:
    Aug 24 06:14 PM | Likes Like |Link to Comment
  • AeroVironment - The Biggest Winner Of Defense Cutbacks [View article]
    The article has

    "FY 2014 Q4 earnings beat Wall St. consensus estimates by 36%, with the company earning $73.5 million over the expected $69.6 million."

    The press release has

    "Revenue for the fourth quarter of fiscal 2014 was $73.5 million, up 36% from fourth quarter fiscal 2013 revenue of $54.1 million."
    (Seeking Alpha)
    Aug 22 01:14 PM | Likes Like |Link to Comment
  • Markel Corp. Willing To Go Places Berkshire Hathaway Is Not? [View article]
    My concerns about Google are, I don't know how much ad-blockers and click fraud will affect revenue, and I don't know if they will make heavy capex to manufacture driverless cars and maybe not keep a competitive advantage there for long. I'd consider buying some Google if there are good answers for those points.
    Aug 20 03:13 PM | Likes Like |Link to Comment
  • Markel Corp. Willing To Go Places Berkshire Hathaway Is Not? [View article]
    The CIO Tom Gayner knew CarMax and liked them, but didn't buy until CarMax hit a problem and the stock fell. It's explained in this interview on gurufocus from May 2013.

    I've charted twenty years of Markel's growth in various ways, on a page on my Wordpress site.
    Aug 20 03:03 PM | Likes Like |Link to Comment
  • Synaptics: Buy For Short-Term And Long-Term Gains [View article]
    There's no consistent relation between the relative size of Synaptics' pie charts and the numbers they are supposed to represent, by radius or area.
    Aug 17 11:14 PM | Likes Like |Link to Comment
  • TIBCO Rallies: Is There More Upside? [View article]
    Do you need to be a data scientist to use Tibco's products?
    Aug 13 03:30 PM | 1 Like Like |Link to Comment
  • Illinois Tool Works: Staying Bullish In The Wake Of Its Latest Dividend Hike [View article]
    I suggest reading the earnings call transcript if you have the time, and taking note of the '80/20' or 'Pareto' principle. Management expect that by concentrating on the most significant and the most promising products and customers, they are better positioned for good growth with good margins.
    Aug 10 11:38 AM | Likes Like |Link to Comment