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Monday, December 31, 2012

Trades... AAPL, FB, GS and QCOM

"Its the final count down." -Rocky soundtrack :)

AAPL - Regardless of fiscal cliff issues, the stock should not be below its weekly trend line near the mid 500s. (For many fundamental reasons.)

FB - It bounced off the 38SMA fairly nicely due to the Instragram negativity, then Facebook's comments on the usage number and analyst upgrades. I was looking to go heavy between 22-24, but the strength during yesterday's intraday action pushed me into an initial position near mid 25.

Looking for FB to retest the 28 level going into its report. (May unload there. Haven't decided yet.)

GS - Looking to get back into GS near 123 or the 5SMA on the weekly. (Although it can test 120s, as there is strong SMA support in that area on the daily chart.)  If GS breaks 128, the weekly 150SMA, GS may enter a new trading dynamic. Maybe a dynamic guided by earnings, not book value.

QCOM - It briefly tested the low 60s area, where I wanted to take a position, I didn't have the balls to take it on due to the fiscal cliff uncertainty. (Thought I could get it near the high 59s.)

As I was writing this the markets just went positive on deal talks. Not getting caught up in the intraday market pops. Already have AAPL and FB. Looking to take positions if there is a sell off in GS and QCOM to desired levels.

Sunday, December 30, 2012

Market Thought... a standing ovation for doing nothing

Turns our Boehner got a standing ovation from House republicans. Awesome to know other members of the house have their heads so far up each other's asses that they completely lack the pulse of the people they are serving. A standing ovation for doing nothing! Nothing.

I am all for a great debate, but for fuck sake, when its time to act, act.

With the continued stupidity, like standing ovations for 'nothingness', the republican party will push their own worst-case scenario: the inability to stop the democrats in 2014.


The markets are looking pretty good to me. Fear has spiked, yet the index is holding up fairly well.

The technicals suggest the fear is near its high. Obviously the market's current situation is driven by politicians (that would rather applaud the act of jerking-off vs dating the prom queen), so any technical assessment is pretty pointless.

Regardless of politicians, the fundamentals always matter.  By the end of Q4, the SP500 is projected to produce a yearly eps of $98-99. Slap a 13-15 trailing multiple on the eps, and the SP500 can potentially trade between 1300-1500.  However, if certain conditions can be maintained, the SP500 my start to trade with a trailing multiple above 15 (for the first time in years). The conditions include:

1. alleviating the cliff concern.

2. alleviating a debt ceiling (US debt default concern) in Feb. (I can give a rats ass about any other rating agency down grade of US debt. The concept of these rating agencies is bullshit.)

3. ECB continues to stabilize the EU banks.

4. US jobs data continues to be strong. (This also suggests the US and Global economy remains relatively robust, along with corporate profits.)

If the above are in check, and China keeps avoiding a hard landing, I do not see why the market will trade with a trailing multiple below 15.  We should start to see a rotation from bond funds into equities, and an increase in multiples. The SP500 may start to trade with a trailing multiple above 15.

Wednesday, December 26, 2012

Market Thought... fear of heights

Looks like the market got a renewed fear of heights. Now the market is adjusting with the Vix spike, with a very light volume day, suggests a protection is being taken.

I am expecting a jump in the vix to approach high 20s/low 30s from 'the cliff' issues.  (I get this number from factoring out the huge outsized VIX moves that were attributed to EU fiscal shock issues.)

Plan on covering the SPY short near 1400.  Out side of the cliff issues, the economy really does look to be improving. Despite the mixed retail data (great online sales vs blah numbers Mastercard), the job numbers (if viewed as a leading indicator) are looking very good.

Friday, December 21, 2012

Trades... FB, QCOM and AAPL

Below are some conditions I am waiting for to take on some trades:

FB - Supports were broken, and from a technical perspective, I am waiting for 22-24 to be seen. (I would like to start re-entering into FB near 24.)

QCOM - I think right now provides a compelling deal, especially considering the level of advancements the iPhone and Android made with smartphone sales. (See below post.) QCOM has chips in most of the key phones. But looking at the technicals, and the negativity of the Fiscal Cliff, QCOM maybe testing 60 again. I will start re-entering toward that level.

AAPL - I am tired of pointing out all the positive facts with the stock. After this mention, I will stop blogging about it until they report or something extraordinary happens that merits mention. IMO, the level of share gain they are seeing (see below post) will produce a earnings beat. I think the negativity of the analysts are grossly misplaced, but this is what happens in a cycle-of-negativity. Fundamentals take a back seat to the technicals. (This is how we see analyst take down their target prices, yet consensus earnings estimates stay exactly the same.)

side note: I really want to start entering the banks again, but they are still too overbought. I would like to see more consolidation. Today's declines really did not do much to entice a re-entry.

iOS is gaining smartphone share sales

iOS is gaining in every market. Below is a month-over-month look at smartphone sales share provided by Kantar. (China was a soft spot most likely due to the iPhone 5 release.)

Thursday, December 20, 2012

Market Thought... let the bitch slapping begin

Boehner could not even get enough votes for his Plan B. (I am guessing the "B" was for Bullshit.) If the futures are any indication, looks like some serious bitch-slapping is about to begin.

This is embarrassing.  The republicans could not even get their shit together to have a bullshit vote for their own plan, which means there is no leadership within the party. Its truly in chaos.  

December 21st 2012 will be the end of something. Its the end of the divisive ideology of the current republican party.

Whatever. I will start using this opportunity to re-enter the banks.

Sunday, December 16, 2012

$AAPL defined by the market

The bullish undertones have left. The action has become a cycle-of-negativity to the perception. Bad news is bad. Good news is warped to be bad.  Negative feedback loops are harsh, obviously. Apple has been in it for 8-9 weeks, although the tone has become much harsher over the last two weeks.

The current market action for AAPL is suggesting a few fundamental themes.

1. A reduction in earnings

The stock's multiple is currently at the very low end. The previous times AAPL has hit these trailing multiples, the stock has rallied. (The first time was after they reported Q1 2012 results. The market had to fill the earnings void. The second time was about 3weeks ago.  The third was yesterday.)

When a stock trades below its average trailing multiple (price-to-earnings ratio), the market is suggesting the earnings will decline. A crude assessment of 2012 indicates Apple's average multiple is 14.  'Reversion to mean' theory would have AAPL trailing multiple around 14.  The current trailing multiple is around  11.5.

In order for the stock to regain a multiple of 14, one of two things need to happen: 1. the stock rises or 2. the earnings decline.

With a trailing multiple of 11.5, the market is saying it expects a 18% decline in EPS for AAPL. ([14-11.5 ] / 14 = 17.8%)  Apple has a current trailing EPS of $44.16. An 18% decline means AAPL will have a trailing EPS of $36.21.

Obviously, the question becomes, do the product trends suggest an 18% decline in earnings?

The most important product trends are the iPhone and iPad. Current chatter:

-increased iOS share since the releases of iPhone 5. (US, Worldwide)

-iPad mini seeing really strong demand. (This is a strong positive being tailored as a negative. Instead of being viewed as gaining w/in the smaller screen tablet space, others point to the cannibalizing of the larger tablet. So they view it as a negative. The negative argument is wrong, and it ignores the increased sales volume, along with the general progression of the tablet space. Classic misrepresentation from people not familiar with disruption.)

I exclude analyst reports in the chatter because they are analysts. Here is how vast their reports vary: Last week one analyst reported an increase in supplier activity. Literally days later, another one reported lower activity. (Coincidentally, the latter report came after the China iPhone 5 debut.  Where, aside from the headlines, the debut was the strongest in the iPhone series. So I consider the latter report suspect. More like bullshit, adjusting the target price due to technicals instead of fundamentals.) But these variations in opinions is why I look at raw data and chatter, not analyst opinions.

China iPhone 5 sales is the one area where the chatter is fuzzy. The raw data suggests good progress. Pre-orders for the iPhone 5 were tracking higher than previous models.  But the perception of weak demand, due to the lack of riots allowed for a lot of misleading chatter, including analyst reports (mentioned above), a China based survey suggesting weak interest for the iPhone 5 (contradicting the pre-order data and grey market facts) and the continued talk of lower iPhone share (even though the same decline in share took place in the US market as it awaited the new phone).

The above chatter in no way suggests an 18% decline in earnings. (An 18% decline in earnings also implies the fiscal Q1 2013 EPS will come in some $5-6 below Apple's own conservative guidance. In other words: Not. Going. To. Happen.)

Since AAPL has not properly traded with its growth rate for some time, the above 'reversion-to-mean trailing PE' thesis could be suspect.  Over the last two years, AAPL has traded with its cash growth position. If we are to assume the trading dynamic holds, the stock will either need to start catching up to the company's cash growth or Apple will find itself $20 BILLION lighter.

Again, the chatter certainly does not suggest billions in losses. And multi-billion dollar acquisitions are not in Apple's nature.

2. a company in decline

That is a loaded assumption, with zero support from the fundamentals and chatter.  The above chatter guides us for an earnings expectation.  There is other chatter that guide us to the internal health of the company.  The chatter includes:

- strong developer support

- competitors keep using Apple products due to the ecosystem stickiness

- iTunes revamp and quick adjustment to the tablet market with the iPad Mini showcase Apple's culture of producing quality popular products and services are very much intact.

- A map fiasco (that the iPhone 5 chatter suggests was a non-factor), ultimately led to Google producing a Map App that was far far better than the original. (A little competition goes a long way.)


With the stock trading near 508, AAPL is discounting a lot of negativity. A level of negativity that would suggest a secular decline in mobile computing growth or a severe disruption to their product lineup.  However, given the overall chatter, the level of negativity the market is projecting is simply not there.

Update: China iPhone 5 sales are no longer "fuzzy". Two million over the weekend.  The UBS Report was bullshit. As for Citi's downgrade right before the numbers were released, looks like they should not have fired Mahaney.

Update 2: chatter has resurfaced regarding Dropbox. If Apple takes the opinions of an influential blogger seriously, this would imply about a $4-8B acquisition. (Dropbox was valued at $4b from its last round of funding in April 2012.) IMO, this purchase would have a positive effect because it would alleviate Apple's need to improve web services.

Thursday, December 13, 2012

Trading notes... AAPL, GOOG, jobless claims

1. Anyone selling AAPL because of Google Maps is not worth any further mention of my time.

2. Google Maps is great. Not sure it merits a 2% rise in the stock price at current trailing multiple.

3. Jobless claims rocked.

Wednesday, December 12, 2012

Dear Eric Schmidt, Shut. Up.

"...this is of the scale of 20 years ago -- Microsoft versus Apple,” said Eric Schmidt. “We’re winning that war pretty clearly now.

The comment from a recent interview is so loaded, and annoying, it actually made me cringe. Its a fucking shame such a stupid interview followed such an inspiring one from Larry Page.

I am a fan of Google.  When Google was being shitted on earlier this year (by everyone), I felt like the lone defender. Many of the tech luminaries were literally saying Google was the new Microsoft. I found myself defending the ridiculous claims over-and-over again.

Yet, here we are, the Chairman of Google has embraced the Microsoft comparison!

Schmidt has embraced the comparison of a stagnant, copy-cat company, that can barely drive the tech sector forward without the help of a true market leader.

Google is no Microsoft.  Android is no Windows. The comparison of 20 years ago is non-existent. A very lazy person ignores the differences in the hardware economies of today vs 20 years ago. A lazy person ignores the difference in hardware refresh cycle of today vs 20 years ago. A lazy person ignores the 'bring-your-own-device' philosophy sweeping corporate culture effectively destroying the 'forced' use of any OS that was a staple 20 years ago.

As for "we are winning the war pretty clearly now", Android took a hit since the iPhone 5. As of late Oct, there are numbers that suggest Android lost 16% share to iOS in the US. (That's "clearly" winning.)

The reality is that Google is still more vulnerable than Apple during the evolution of mobile computing. Google needs to embrace Apple more due to the above. (Android is good, but not best of breed. Consumers, especially consumers in mature markets, are choosing best of breed.)  A one percent move in Apple market share is a powerful multi billion dollar effect. (Oh, Apple global share has increased from 3.9 to 5.5%.)  Google's quarterly reports indicate a 70% share has no where near the same effect as Apple's 3.9% share.

The numbers do not suggest Google is winning anything. The numbers mean Google has to re-adjust their business model in mobile. Lucky for Schmidt, even those that hate his comments, can see Google shifting their mobile strategy to mimic a company that is "losing". (Motorola unloads most manufacturing capacity, which will lead to better margins.)

Google is very lucky to have Larry Page in charge at this stage of transition.

AAPL - technicals

AAPL has re-gained one technical footing today.

The 5 SMA was breached. (Bullish)

The next step is the 550 area. It represents the weekly support (that frankly should not have been broken given the fundamentals and cash growth Apple will be seeing).

After 550, the next level of resistance is the high 570s via the weekly. (The 14 SMA could act as resistance, but it did not in mid-Nov, so the probability is high that it will not act as resistance this go around.)

Frankly, I can give a rats-ass about the above technicals. The only real level of resistance w/the current strong fundamentals (assuming much stronger supplier sales mean anything), is the 90 SMA (via the daily chart) around 620.

Saturday, December 8, 2012

Fiscal Cliff pair trade

(Been debating whether or not to publish this post, only because I am not sure if the highlighted selling below is due to tax selling.)

The general market has been acting very very well considering the threat to the fiscal cliff. (Albeit, excluding the massive declines since Nov 6th.). At the moment, the market is not really worried.

However, internally, we are seeing a concern, most notably displayed by Apple.

AAPL has systematically declined over 20%. It has declined so much so that it is the most inexpensive of the large-cap tech stocks, as per comparative metrics. Much of this decline is being credited to tax selling from long-term holders.

The more and more I think about the tax-selling argument, the more I can see the justification to it. A look at some of the biggest gainers over the last two years include: IBM, ROST, TJX and CHTR. All these stocks started to see declines starting around the same time of the year. VFC is another name that saw a leveling off, but not as much of a decline. (Some outliers are MA and V. Their ascension has not skipped a beat.)

Looks like stock with big gains have been front loading the potential tax hike from 15% to 35%.

As the days close in on the end of the year, and the threat continues to loom, we may start seeing general market weakness. And the names that have been front loading the action see a tamer decline. The pair trade would be to short the SPY and be long names like AAPL.

Wednesday, December 5, 2012

AAPL the cheapest, again.

In one day, AAPL has regained the title of the cheapest large-cap tech stock. (I highlighted this fact on Nov 15th, and here I am highlighting it again 3weeks later. New info was provided.)

Here is a quick look:

PE - 14.42
Forward PE - 8.21
Cash (net debt) ~ $54B (~$6/share)

Microsoft heavily dependent on the declining PC, making its prospects suck. Ballmer is a crappy CEO, confusing the act of copying competitors (in search and mobile) and calling it 'innovative', thereby bastardizing the word.  Forward PE is also suspect due to the poor performance of Windows 8 and rapidly declining PC sales.

PE - 13.56
Forward PE - 11.34

They are positioned in the heart of the next phase of technology utilizing big data. The cash position is irrelevant with IBM because of their continuous re-purchases and dividend. They have a good balance of healthy financial engineering. I am a big fan of IBM, but have been waiting for their chart to firm up.

PE - 8.66
Forward PE - 10.18
Cash (net debt) ~ $3B

They are in a rapidly declining sector, and not moving fast enough in mobile. Hence the Forward PE, while already higher than Apple's, is very suspect.  The other day they issued $6B in new debt. IMO, effectively destroying their balance sheet. (I see an HPQ re-run.)

PE - 18.15
Forward PE - 13.42

The best supplier positioned to benefit from a sector growing from 1.2B units to 5B units globally.

PE - 21.55
Forward PE - 14.83

Google is knee-deep in mobile, social and web services that are growing strongly. IMO, they need to tweak their strategy on hardware because desktop may deteriorate faster than expected. The chart below best highlights my concern. This trend is taking place all over the world. (The chart is from Mary Meeker's year end Mobile review.)


PE - 12.20
Forward PE - 9.30

Cash: $121B, $127/share, (from last quarter) Remove the cash and the value of Apple's businesses (which are gaining market share) are in single digits, again. SINGLE f-n DIGITS!

Apple is knee-deep in mobile, and the evolution in computing. They are growing their computer business while disrupting the PC and their own computers. The iPhone continues to take global market share.  The iPhone US share has increased. The iPad Mini and iTunes 11 indicate the culture of high quality products outside the era of Steve Jobs.

The company best positioned to continue to take advantage of the mobile trend, is trading at the lowest comparable metrics.

Valuation is obviously a very subjective thing. I can produce a valuation to justify AAPL to trade between $600-700 pending on the method used to value the stock. (Although any of the generally accepted valuation methods can not produce a value for the stock with a 500 handle.) Regardless of the valuation method, the company best positioned for the future of mobile computing (and all that implies) is trading at the lowest comparable metrics to its peers.

AAPL market inefficiency

The craziness of Apple continues. If its rallying, the market players keep talking about the rally. If its declining, thats all we hear about too.

Noise aside, and lets look at recent developments in AAPL:

1. Apple has shown it can successfully create and transition products without Steve Jobs. (Meaning the company culture is very much alive.) We see this in the iPad Mini and iTunes 11.  

The iPad Mini is selling very well. And iTunes 11 has received pretty good reviews

3. China will be the largest mobile market, and Apple dominates there. (tablets)

The only known negative for AAPL is that yr-over-yr comparison growth will not be as extreme as the past two years. But the market never rewarded AAPL when it was growing at a +85% earnings clip. Instead over the past two years the market has allowed AAPL to trade with its cash-growth.

The stock price is currently around 550. The above is projecting a modest $8B cash growth from the last quarter. (The $8B is due to historic cash generation from Q4-to-Q1. But the number really should be higher this go-around because of new product launches and expanded reach of those products.)

Based on cash-generation, AAPL's stock price is to be near 650-700. Based on historical trailing PE ranges (around 13.5-14.5) AAPL should be trading near low/mid 600s. (And if looking at the cash-flow, excluding cash and just the businesses, AAPL's stock should be near high 600s/low 700s.)

Any way I look at it, AAPL's stock merits a +600 handle, not a 500 handle.  Regardless of current action, as the quarter begins to end, AAPL's stock will begin to recognize the above.

A consolidation from the recent run was merited. A +20 point decline is not.  AAPL is currently very oversold.

Thursday, November 29, 2012

Market Thought... yes ma'am, may I have another

"I'm disappointed in where we are and disappointed in what's happened over the last couple of weeks." -Boehner

That's a pretty different characteristic to Blankfein's opinion last night. I guess Boehner is telling the markets that the republicans want to be bitch-slapped, a hard bitch-slap across the face. Its probably the uncontrollable fruedian sadomasochistic persona dug deep within the extreme of the Grand Old Party.

The markets are the great equalizer. The effects of the markets have changed more governments in Europe, then years of war.  The bitch-slap the market can induce is literally forcing legislative changes all across Europe.  Like a mother disciplining her son, that back-of-the-hand has power.

On November 6th, the American voters have already given the Republicans a black eye. In response, the Republicans shifted their tune. First Boehner came forward with a softer, beaten tone. Throughout the last two weeks, multiple republicans have begun to back away from a grade-school-caliber-tax-pledge. (Many CEOs are also lobbying to stress the importance of a deal.)

The chatter would suggests a deal will be made before the end of the year.  But, if the Republicans choose to ignore the pressure of the American people and the most respected CEOs in America, then they will get bitched-slapped by Mrs Market.  This is a ridiculously obvious scenario. Its almost childish, and frankly embarrassing, if the Republicans allow the markets to force their hand.

The current trading dynamic suggests the markets want to go up. The SP500 is pretty overbought, and has been for the last 30 SP500 points, yet cutting though resistance. Economic data is getting better. Jobless Claims are rapidly improving from the effects of Sandy. The only thing that can derail the desire to push-upward is sadomasochistic behavior.

Monday, November 26, 2012

Facebook new trading range

Nice breakout from 24. Looks like Facebook is approaching 27, and potentially a new trading range.

FB is about to approach a heavy resistance area while being very very overbought.  The easy trade from 19-27 is ending.  A new trading range will emerge, but it is too soon to tell from where.  The obvious is between 22-27.  Although 24 should act as the new base.  Given the shift in momentum and better perception from the street, if FB starts breaking through 27, the new range could be low 30s-to-24. 

Congrats to those that played the recent trade. As I have traded the stock pretty well, I am currently left with an initial position in FB. I would like to let this position ride, in hopes 27 is breached, and a higher trading range is seen. (The obvious technical stop out of the trade would be a breach in the 5 SMA. As FB is currently riding the moving average up.)

Fundamentally, I really do think Facebook mobile ads are not in the same league as general mobile banner ads. I think Facebook ads are far superior. Based on the chatter, the ads appear to be best of breed within mobile.

Friday, November 23, 2012

Google... brilliantly shifting

Over the past year, Google had an interesting roller coaster ride of perception. Earlier in the year, the influencer-blogger-class all were spewing garbage chatter that Google was the next Microsoft. Despite the clear evidence and blatant comparisons to the contrary. That perception has allowed Google to trade at recession level trailing multiples (below 19) in May/June of this year.  (The market was being stupid.)

(A blog search for GOOG or Google will bring up all my thoughts on Google from earlier in the year.)  The market has now witnessed how rapidly Google can transition. The rate at which is simply awesome.

1. The revamped Google Play has become a worthy competitor to iTunes.

2. Google's branded phones/tablets, Nexus line, are gaining brand recognition and have high demand. (The line is no longer an avenue to push higher standards with OEMs, it has become a sought after brand.)

3. Google mobile services are simply kick-ass.

4. Google's voice recognition technology (Google Now) is at par, and arguably some what better, then Siri.

The shift has not gone unnoticed. The market has rewarded Google with an expanded multiple (higher valuation). It currently trades at a trailing multiple of around 21. Thats about a +25% increase from its 2012 troth.

At the moment, the market appears to be efficient with Google's stock price.  IMO, in order for Google to maintain its 19-21 multiple it needs to make better progress with its hardware profitability.

As the post PC world rapidly takes over, I fear desktop search will erode far more quickly than analysts are currently expecting. (Even though October saw an increase in desktop activity.)  And even though Google is well positioned for the mobile transition w/their android network, the mobile ad rates are simply not yet high enough for that transition.

Google needs to utilize all possibilities to increase revenue and earnings. Now that Google has developed a brand name with the Nexus line, Google will need to shift strategies from a no-profit device to a for-profit device. (If ever so gradually.)  The level of demand they are seeing for the Nexus 4 and 7, means they can charge high prices.  This also means Google can cut even more expenses from Motorola. (There should not be such redundancies within Google. They need to streamline.)

My current fear with Google going forward is that they will be a habitual under performer during their quarterly releases until they streamline their hardware efforts or mobile ad rates rise.

Until the above changes are made, I am uncomfortable with Google having a multiple higher than 22. With that being said, Google has shown their lack of stupidity and ability to rapidly adjust. They will eventually streamline their hardware operations. Until then, I am more comfortable entering GOOG when it has a trailing PE of 19 or below.

Wednesday, November 21, 2012

Iger buy $1M of AAPL

Being the CEO of Disney, and an Apple board member, this buy can make one think the Apple Television is around the corner.

Maybe he sees the potential of an unannounced New product. Or he just thinks at current price it's worth a big buy, despite a new product. Maybe a bit of both?

Monday, November 19, 2012

To our congressmen and women...

You gonna go that inch for us? Heal as a team or die as individual parties. What are you gonna do?


Thursday, November 15, 2012

its official - AAPL the cheapest

How things change in 8 weeks. Eight straight weeks of decline has allowed AAPL to become the cheapest, literally, amongst other large tech stock.

Here is a quick look:

PE - 14.41
Forward PE - 8.23
Cash (net debt) ~ $54B (~$6/share)

Microsoft is obviously heavily dependent on the PC, making its prospects suck. Ballmer is kind of a crappy CEO, confusing the act of copying competitors (in search and mobile) and calling it 'innovative', thereby bastardizing the word.  Forward PE is also suspect due to the low expectations of Windows 8 adoption and rapidly declining PC sales.

PE - 13.36
Forward PE - 11.17

They are positioned in the heart of the next phase of technology utilizing big data. The cash position is irrelevant with IBM because of their continuous re-purchases and dividend. They have a good balance of healthy financial engineering.

PE - 8.74
Forward PE - 10.17
Cash (net debt) ~ $3B

They are in a rapidly declining sector, and not moving fast enough in mobile.

PE - 17.48
Forward PE - 13.09

I don't need to look at their cash because they just confirmed at least 10% revenue and earnings growth per year for 5 years! The benefits of being in the sweet spot of a sector growing from 1.2B units to 5B units globally.

PE - 20.28
Forward PE - 13.95

I don't need to look at their cash either because Google is knee-deep in mobile, social and web services that are growing strongly.

PE - 11.91
Forward PE - 8.96
Cash ~ $121B (~$127/share)  Remove the cash and the value of Apple's businesses (which are gaining market share) are in single digits. SINGLE f-n DIGITS!

They are knee-deep in mobile. They are growing their computer business while disrupting the PC and their own computers. Despite being called "high priced" by Ballmer (who laughed at the iPhone and is now blatantly using Apple's strategy), the iPhone continues to take global market share.

Of all the above companies (and I am a big fan of IBM and GOOG), only QCOM and AAPL are completely leveraged to mobile and the next evaluation of computing.  Both are trading at the low-end of their multiples, except AAPL is trading with the lowest comparable metrics. The lowest, yet the best positioned to continue to take advantage of the mobile trend.

Another interesting fact, with today's decline, the cash-to-stock price divergence has become historic. It is now around 28%.

Wednesday, November 14, 2012

Market Thought... Limbo

The week of meetings. The president is meeting with business leaders today, and civic leaders on Friday. How awesome would it be if a deal was announced this weekend!?! (It wouldn't be awesome, it would be Fucken-Awesome :)

Around 10:15-10:20 this morning the market lost its air. The only economic data point around that time was Business Inventory, and the number was better than expected. So that's not the reason for the decline.

It seems as if the bigboys are simply waiting. Momentum boys are using this to drive direction. They chose down. (Ill update this post with some charts later in the day.)

Looks like we are in these mo'mo hands probably until the end of the week. I don't think any short, in their right mind, would want to take a chance going into the weekend over weight short, in case a surprise deal is announced.

Keep in mind, CEOs want a deal. They don't mind some tax increases, and seem to be on the same page with the president. Leaving the House as the road block. (Whose leader is open for increases.)

Update: The market is front-loading the "bitch-slap" to our civic leaders. The weakness throughout the day is putting more pressure on both sides to get the deal done, with the Republicans having more to lose if they fail. (There is no excuse the republicans can run from, fresh off of an election, which chose Obama's message.)

After 10:15ish, the SP500 started to breach its 200sma, so the negative chatter was inevitable.

Blah fed minutes didn't help the situation either.

On a few positive notes, the SP500-VIX overlay, along with the market's very oversold condition, suggests we are near a bottoming (assuming a deal is done).  The treasury yield is also very oversold, and it did not act as safe haven play.

Thursday, November 8, 2012

Market Thought... fiscal cliff will be avoided

The voters have spoken, and the chatter from the republican party seems like they understand the need to embark a more moderate tone.  Most shocking, and comforting, was Boehner firmly establishing the House's willingness to work with the president.

IMO, the 'fiscal cliff' uncertainty will end quickly. (If not, the republicans seal their fate in 2016. Hurricanes we can not control, jumping off a fiscal cliff we can certainly prevent.)

Boehner's statement is the strongest and latest confirmation of a new Washington. Frankly, I am surprised the market did not adjust for this chatter.  Instead, the market declined about 4% in two days.

Complimenting the market decline was the weak action in treasuries.  After the election, the 10yr decline below support levels.

What I find particularly inefficient about the current decline in treasuries is that it is contradicting the jobs data.  As indicated in the above chart, the last 5 employment numbers have been better than expected.  On top of this, the jobless claims, while volatile, have been near the low end.

Economically, there seems to be a disconnect with the action in treasuries and job data.  The disconnect is contributing to the market decline because a lot of models use the strength in treasuries as a point of reference.

The market was already reacting to a weaker earnings front, but some of that weakness was already expected. So the move to 1400 on the SP500 was not surprising. Consensus estimates were for the SP500 to see a decline this quarter.  This was factored into my previous Market Thought post.

The timing of the decline does not suggest this is an earnings decline. Also, the market is allowing for some serious multiple compression, especially within the technology names.  This maybe attributed to the weak technicals in the Nasdaq.

Of course a lot of this weakness is probably due to AAPL. Seven straight weeks of decline, seven!

AAPL has declined to three very strong supports:

1. The weekly 50 SMA.

2. The support line

3. The trailing multiple is simply too low. Way too low. From a trading pattern perspective, below 12.5 is a super strong buy for AAPL.

Anyone can whip out superficial negatives for AAPL from manufacturing issues to management shake-up to whatever the talking heads care to pollute the airwaves. The fact is, AAPL will be experiencing lower year-over-year comparisons. Does that mean anything for a company increasing its cash position about $4-10billion a quarter? The awesome, +85% growth, comparison did jack-shit to the stock's multiple from 2010-2011. I pointed this out about a year ago in the "Apple stock seriously discounting" post.

The "Apple stock seriously discounting" post highlights the severe multiple compression experienced since Apple's fiscal 2010-present. Since then, a very strong argument can be made AAPL has been basically trading with its cash position.

With the current decline in stock price, there is a disconnect between the cash position, and the stock. Either Apple's cash position is going to come down some $30 billion this quarter or the stock will rise to catch up to the cash position. (For the Q1, I assume a +8B to the cash position. Although even if the position is flat, the stock still needs to catch-up, as it did in Q2 2012.

(IMO, the cash vs stock price also highlights why AAPL is not your normal parabolic chart. The move is supported by the most important capitalist foundation, cash.)

Needless to say, I think this market decline is ridiculous and way over done. Along with Apple's decline.

Thank Elizabeth Warren

Today was a tough day but financials got knocked hard.  The chatter was blaming Warren. Despite having a light position in JPM, and swallowed the 5% hit, I have no problem with Warren or the banks.  I am a big fan of hers, but a fan of the banks too.

Until today, banks were trading near book value. They should, at the least, keep trading near book value until rates rise (due to improving economy) and can be valued via earnings.  With a stable economic environment, bank stocks should maintain book values.

The Warren decline, allows for re-entry of the bank stocks. As per the technicals, GS gets really really interesting between 110-113.

JPM gets really really interesting around mid 38.

Wednesday, November 7, 2012

QCOM = awesome

Better than expected quarter numbers. Better than expected Q1 2013 guidance, which brings QCOM to an accelerating earnings growth from a flat to contracting earnings story for the quarter.

I will update this post tonight with numbers, but the story is very much intact. The best part is that the big-boys have to readjust their models , and their automated programs will flash "buy" or "cheap". What ever we call it, the stock will be given a higher multiple.


Today's severe decline should not have happened, but it did. The magnitude was most likely exaggerated because the Nasdaq started breaking some key moving average supports, and of course Apple's decline.

A pure technician poops their pants, and sells. A person who understands the magnitude of a 42% year-over-year smartphone growth, and a projected 1B to 5B unit growth, understands QCOM should be in the 70s not 50s!!! In-turn, QCOM exceeded expectation and analyst guidance by 16%.

Before the manufacturing issue, which looks to have gotten alleviated, QCOM's low-end trailing PE was 19. It would only go below 19ish during recessions. There will NOT be a recession in smartphone/tablet growth.  A very reasonable assumption is that QCOM should, at the very least, start to trade at its old low-end multiple of 19-20.

QCOM will have a trailing EPS of 3.51 (GAAP). Slap a 19 multiple, and we get a stock price of 66. Looking forward, as the holiday season progresses, QCOM will merit a higher stock price, thanks to accelerated earnings. The trailing eps will approach 3.68, which will lead to a stock price of 70 with a multiple of 19.

Of course, I am only assuming the low-end estimate. But doesn't a stock, knee-deep in a sector growing in multiples, deserve a higher multiple?

AAPL fyi

Apple is trading near historically low trailing multiples. (12.59)

Also, does anyone even realize the iPhone 5 hasn't even been released yet in china. (That's coming in December.)

Strong demand across all product lines, and the multiple is at historic lows. Makes complete sense.

Election over, fear pop up

That was quick. With literally no time to breath, fear chatter of EU and 'fiscal cliff' are now in control.

The most glaring note of promise with respect to the fiscal cliff was Gov Christie, and how he was able to squash partisan perception.

Update: The selloff is overdone.

Monday, November 5, 2012

Subsidies a non-issue for AAPL

"Vodafone's Spanish division is bringing back subsidised smartphones, it said on Monday after losing more than half a million customers in the second quarter of this year while competitors Orange and and Yoigo gained market share."

Back in May, the removal of subsidies were considered stupid and greedy

3M in 3 days

Apple made over $1 billion in revenue over the weekend. One billion unsubsidized dollars.

(3M iPads assuming the lowest price of $329 but of course the newest iPad sold in the weekend also at a higher price.)

Should we assume the iPad mini is the first non-Jobs product that sold out in Apple history? If so, it says a lot about Apple's culture driving the company.

Sunday, November 4, 2012


fyi - still dealing with limited Internet and loss of power.

A lot of consolidation over the past month. About 18% in a month and a half, while the iPhone 5 has strong sales and the iPad mini looks promising. The decline has allowed for multiple compression, despite very healthy revenue growth.

Any argument that justifies high multiple stocks simply does not apply for AAPL because of its size. Regardless of enviable organic growth.

Trader chatter gave credence to the daily 200day sma. IMO, that sma was weak for AAPL. The 90 day mattered more. Once that broke, the higher probability was to test the 38sma on the weekly chart. But if sentiment got more negative, trader sentiment is likely to take AAPL to the 50 weekly sma.

My recent thesis on AAPL is predicated on the multiple the market will allow it to have. With Friday's decline, the multiple has reached 12s. 12.9!! The market has not declined nearly as much to merit the low multiple. (That Sentiment shared for QCOM as well.)

IMO, next week we get a flush out as AAPL tests the area near the weekly 50 sma. Will be accumulating near between the 560-570 area.

Current estimates have come down quiet a bit. Apple estimates are near 11.75, where as the street has them at 13.30. Apple usually beats the x-max quarter by 20-30% (not factoring in last years 38% beat because margin expansion will not be so awesome this year). Can't blame the street for coming down either. Apple has missed their estimates 2 quarters in a row, although Apple usually misses the fall quarter. 

Friday, November 2, 2012

Apple Maps - it helped

It helped me today. Along with Siri. The combo were actually productive to my well being.

First a background of opinion:

I have not upgraded to iOS 6 via the iPhone yet because of the removal of Google Maps. Big fan of street view, and its functionality. But I updated my LTE iPad to have the latest OS.

Today's situation:

Going to the doctors I tried using Google Maps, but the loading time was pretty long on the phone. So I used Apple Maps. (It loads quickly.) The turn by turn was very good, and my wife was a big fan. What really impressed me was as I was leaving the doctor's office.

Driving off, I forgot to enter the new destination. I put Siri to the test. I asked Siri for directions to my destination, and she produced wonderfully. Kudos.

Now, once I have access to WiFi, I'll upgrade to the new OS.

ps - Getting ready to add to the AAPL position. (more over the weekend)

Thursday, November 1, 2012

Difficulty with links

The limited access to the web (via iPad and iPhone) is preventing the update of the Transparency link.

Still in the dark, and Sandy is making me take cold showers.

Wednesday, October 31, 2012

China rebound

Decent numbers out of China tonight. They are slowly climbing out of under performance. The FXI has closed the gap with the SP500.

Just an fyi: still no power but making do with the wifey. Simply crazy the type of damage Sandy has caused.

Monday, October 29, 2012


Annoys me to no end that utilities are sitting on their antiquated hands, and not implementing a proper smartgrid.

Exciting. Apple vs Sandy

Not to be undone by Sandy, Apple released management changes.

John Browett has left. This is not surprising. He never felt like a good fit at Apple. Some of the actions he took were real head scratchers.

Scott Forstall is leaving. This is a bit surprising given his status. But bringing the iOS and Mac OS under one roof was inevitable. Especially with respect to the post PC concept of same content on various devices.

I really like that they are trying to apply Ive's design mentality to software interface.

Most surprising is that Bob Mansfield looks to be staying. (I thought he was going to retire.)

As for Sandy, she took out my cable and Internet. (Thank you apple for ushering in the mobile device/web convergence.) And she is teasing my power. Already witnessed a transformer blow. Winds have picked up, and shes not fucking around.

Saturday, October 27, 2012

the INTC hedge

I am not a fan of Intel. The company is about 5years late to mobile, and getting dragged down a sinking PC ship.  But I respects its fierce competitiveness, and its engineering capability.

To date, Intel has been pretty dead within the mobile space. Only recently has it over come battery line issues and App compatibility issues with their Atom base mobile processors, leading up to the 'Razr i'.

The 'RAZR i' allowed for an interesting comparison between ARM based 'RAZR m' that used ARM based processors over a year old. (Comparing a company's latest and greatest vs an older model is really not fair, but so is life.) The comparison was favorable for Intel.  The App compatibility issue was mostly resolved, and real-world power consumption held up very well.

The recent developments showed Intel is on their way to simply enter the mobile market. But, and there is a big BUT, we do not know a lot of things. The most important aspect of thing we do not know is cost. (I am also concerned about how their LTE capability will be.) In fact, the only thing investors know is what Intel 'claims' within their road map. (Their road map is specific to chip size, and nothing more. I am more interested in how the smaller chips will operate with the unit, and if the smaller size really enhances the over all user experience.)

At the moment, the RAZR i looks like a test phone.  If things go well, then Intel will have a basis to tout its experience and performance.  But other chip makers are not standing still. (At the very least, Apple's A series chips are a testament to the innovation push.)

I am a firm believer that QCOM owns the mobile space, and will continue to do so. Hence my recent post, "QCOM - pesky fundamentals", and a position in QCOM.  I do not like investing in "could be" stories, and right now Intel is touting a heavy "could be" story via mobile.  The RAZR i is the only tangible evidence it can enter the space. But a new chip vs an old chip is nothing to really brag about.

On Friday, INTC started to breach its negative trend, via the 14 SMA resistance. Because of the technical set up, I decided to enter the stock.

I view the position as a hedge to QCOM, and the fact Intel is yielding 4% helps.  I will probably hold on to this position until I unload QCOM, or come CES we begin to see just how fruitful Intel's mobile effort really will be. 

Mahaney fired at Citi

The news was a surprise to see. I rarely listen to any analyst opinion or commentary to make trades or investment because I try my very best to let pure data guide those decisions.  But there are a few individuals I listen closely to, Mahaney was one of them. (His work is usually less bias then the rest.)

Given his status within the investment world and technology, I am sure he will be fine. (Its really Citi's loss.)

The article also highlights obvious interactions between bankers and journalists. (The interactions should not be a shock to anyone.) One of the journalists mentioned was Josh Constine from TechCrunch. I found that interesting because over the past two quarters, he produced some really interesting articles and information specific to Facebook. So much so, I felt he was Facebook's 'leak' guy. Just like Steve Jobs used Walt Mossberg, I got the impression someone at Facebook (who knows, maybe Zuckerberg himself) was using Josh. 

Firing key people like this keeps making Citi look stupid.

Thursday, October 25, 2012

AAPL. all about the multiple

The quarter was alright. I'm sure the guidance of 11.75 caught a lot of people by surprise. Its probably the first comparable eps decline in some time. Given Apple's low-ball guidance, I am sure they will produce an eps near or slightly above the eps of last year's 1st quarter. Last year's 1st and 2nd quarter had higher margins. With the multiple tablet push from all competitors, and lower price points of the iPad, margins will simply not be as good.

Regardless, the margin scenario is not stopping top line growth. In relation to any other company AAPL is still cheap, and has been for years.  So they will not see +50% eps growth, they will see 20-30%, and earnings are very stable. Does this merit the stock to collapse?

With lower margins, and a flat eps growth for the quarter, the question becomes 'what is the multiple the street will give AAPL'?

Will the street punish the stock? Allowing it to trade at a trailing multiple near its low of 12.5 because of the flat eps? The street certainly did not reward the stock when it was seeing a +50% eps rate last year with 50 trailing multiple. In fact, when AAPL was growing at a +85% clip the street rewarded the stock with the greatest multiple contraction I have ever witnessed.

Apple now has a cash level of $127-128-per-share. Which means the stock, as of after-hours action (609) has a business value of $481 per-share. This means the street values Apple's businesses with a trailing multiple of 10.89.  For a set of businesses that will see a top-line growth of 13% (2011 1st quarter had an 46B revenue, and 1st quarter 2012 is projected to be 52B), an obscene free cash-flow and product being adopted at a very very fast clip, the street is basically valuing the business as they are Intel's business. (I don't need to explain why this is stupid.)

Excluding the "minus cash" or "valuation-per-cash-growth" (assuming the stock value should trend the cash growth) argument, at 609, Apple has a trailing multiple of 13.8. This is already near its low end.  The contraction is consistent with the current market environment.  If the market holds up, this valuation is too low. AAPL should trend more toward a 14.5 multiple.

From a technical perspective, AAPL's daily chart is very oversold.

From a weekly perspective, an interesting support is very near. The 28SMA typically acts as an area for a bounce.

If that level breaks, the 50 SMA on the weekly is next. (That would mean the stock drops to the 560 area, giving the stock a trailing multiple of 12.6. Near historically low multiples for AAPL.  That would suck, but given the growth of cash, I do not expect it to happen.)

I will try to play a bounce off the 28SMA.