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Tuesday, December 31, 2013

$aapl target prices

Its simple.

Maintaining trajectory: 47 x 14 = 658

Factoring increased growth from market share gains, china mobile and better perception of services:

47 (will be higher) x 16 = 752

A multple of 14 is already conservative given the level of multiple expansion some large cap names, and the sp500, wittnessed this year.

A multiple of 16 is simply the known high-end multiple of Apple as a mega cap company.

Mr Statistics suggest a high probability that AAPL sees 700 in 2014.

Easy trades to the long term upward trendline:

Saturday, December 28, 2013

Market Thought... Japan Stimulus

Abenomics has an inflation target for Japan of 2%. The target looks to be approaching.

The above assumes CPI increases from Dec to Feb. Unless macro conditions shift in the next few month, the inflation target should be achieved in February. Curious as to the below set up when that happens. 

Friday, December 27, 2013

Tuesday, December 24, 2013

Market Thought... Obama speaks of 2014 US economic growth

Whatever your political preference, throughout President Obama's terms, when he has spoken of markets, it paid to listen. (When he spoke of healthcare, it paid to ignore :) A couple of days ago, he made a similar declaration: 2014 will be a breakthrough year for the US economy.

Good thing too because Goldman Sachs conveniently declared caution on the Emerging Markets.

Looks like the US will pick up the slack for Global GDP. But there are a few wild cards, and interesting scenarios brewing for 2014.

1. China's ability (or willingness) to promote moral hazard. Knowing China's central government's tight control, its only a matter of timing.  (Maybe they will wait until the Muni-like set up is ready to take action and allow the needed flush out of the weak players.) But a popular chinese think tank still declared a 7.5% GDP growth target for China. (IMO, seems a bit optimistic.)

2. Japan winds down their currently successful stimulus, and the Europeans enact theirs.  Other than Germany, the EU country-states are horrible condition with respect to unemployment.  The EU needs to do more.  While GDP declines have seemingly stopped, the GDPs need to grow. IMO, the Euro is still way too high.

3. 2013 was a year where the Fed successfully pushed market players into equity markets. With the treasury rising, to facilitate a robust US economy, equity markets will have competition again. 3-4% on treasuries are pretty healthy.

4. Robust US economic growth means more Fed tapering. If robust employment figures continue, assuming a $10billion tapering each month would be the Fed stops its bond purchases by June/July 2014.


I have little doubt 2014 will be a great economic year for the US. But my concern is how the growth will effect markets.  Right now the SP500 is trading at very high trailing multiples. (Above the traditional-high end.)  The above factors traditionally lead to multiple compression.

The SP500 is predicated on a very simple equation: "reported earnings" x "trailing multiple".

Consensus estimate "reported earnings" are about 108 for the end of 2014. (Although I have heard estimates as high as 122, which imo is aggressive as it represents a +20% eps.)

108 multiplied by a 15-17 multiple is 1,602 - 1,836.  Given the market's willingness to trade near 18 over the last 6 months, we can not ignore the potential 18 multiple. But the above factors should mitigate an abnormally high training multiple.

$aapl acquisitions services driven

After this article came out, two more purchases were confirmed: Broadmap and Catch.

10 of the 12 known acquisitions were services related.

One can argue AlgoTrim is related to services, to improve back-end efficiency. Hence improving service performance. That would make the number 11 of 12.

(Although I am of the unpopular consensus that a well thought-out hardware strategy is part of an ecosystem/platform.) 

Sunday, December 22, 2013

$aapl $chl deal, finally

After the smoke, then the official denial (by China Mobile's CEO), we finally see a China Mobile "multi-year" deal.  Given the already known history of difficult negotiations, the difficulty of current negotiations seem confirmed with the press release stating "Apple has enormous respect for China Mobile..."

Despite the difficulties with China's largest carrier, the iPhone has been gaining share in China's smartphone market with the release of the 5s and 5c. China Mobile needed this deal too.

Apple now has exposure to over 700M subscribers. HUGE.  But the important number is their 3G subscribers. Currently that stands at about 180M subscribers. Still HUGE. (Official CHL sub numbers)

Assuming Apple can maintain a 10% share, via the 3G customers, thats 18million new iphones. But as anyone can see, the adoption rate to 3G has been about 100m in one year. That's really awesome growth. The transition to 3G should continue at a rapid pace. Some on the street (Brian White) are expecting 600m 3G subs by the end of 2014. Not sure how realistic that is, but dependent on how fast the sub conversion takes place, we can assume how many iphones get sold.

Apple has added the last few major carrier hold outs, via NTT DOCOMO and China Mobile.  In Japan, the iPhone already has major smartphone share, north of 60% (in Sept and Oct).

These two additions suggest faster iphone adoption. Greater iphone adoption means higher earnings.

Keep in mind, even without this deal, Apple purchased over 40million shares and has set-up the stock to see earnings growth for 2014.  The China Mobile deal is icing on the cake. Depending on the sweetness of the icing will guide the level of multiple expansion to the stock.

Given the level of multiple expansion seen in names like Google (some 87% since June 2012 for the 3rd LARGEST US company by market capitalization), I would not be surprised to see the true leader in mobile space see a multiple expansion near 16 again. (Keeping in mind, a multiple of 16 is still BELOW the trailing multiple of the overall SP500.)

$DIS - progressive media

DIS is one of the few media companies I truly love watching as an investor. As a traditional media company, they are very progressive. Probably a forced outcome having Steve Jobs as its largest shareholder.

They actively push their traditional content through new media distribution mechanisms. With the stock at all times highs, the results are being recognized.

Part of the stock move is multiple expansion. Historically DIS sees a high-end trailing multiple around 19-20.

Much of that expansion is most-likely from new content opportunities, like mobile games and the new Star Wars movie. 

Another may very well be how DIS uses social media. (Right now, it seems to be a missed opportunity.) For instance, I follow Darth Vader on twitter, for shits and giggles. (He's pretty funny.) But I noticed a "sponsored" tweet the other day. This sponsored tweet is not through twitter, its directly through the Darth Vader account.

The math is simply. Disney has a shit load (A LOT) of awesome characters, which can easily number the millions.  Those eye-balls can be monetized, and used to actively promote content via the established base directly to the fan. Potentially minimizing costs. (More justification for a multiple expansion.)

Get on it Disney.

Friday, December 20, 2013

Market Thought... the China question

China has increased their cash infusions this year.  This leads to obvious questions around moral hazard. If it wants to create a muni-like structure, and legitimate local-level investor trust, the system has to work at the local level. In order for that to happen the players getting crunched need to be purged.

When will China allow for the pain needed to purge the weak players?

The central government has a lot of money, and can prolong the natural pain. But one day we will wake up, and see that they decided to teach the bad-boys a lesson.

Saturday, December 14, 2013

$goog robot ambitions have been foretold

The NY Time reports more robotics companies going under Google's wings.

Connecting the dots: Deep learnings, central cloud system, unifying software and now robots!  Google is USR!

Who knew Will Smith was also a prophet of the techno-future. Is there anything this man can't do :)

Tuesday, December 10, 2013

short $goog

Too far too fast. Already at yearly targets, from multiple expansion. 

Looking for the price to hit the 10sma on the weekly. 

If a hiccup is seen in the story, may very well retrace to 960. (Only playing the technical move, for now.)

$yhoo core biz valuation

One of the better internet analyst (Mahaney) is projecting Yahoo's core business valuation to be about $10B.

Any of the recent gains are still attributed to Alibaba. (They have had monsterous shopping season. And the biggest shopping days are still to come in China.)

The holiday quarter should be the watermark. Design changes were in place and numbers should be improving. If the street starts to smell improvement, the core business valuation has lots of room to move. 

Sunday, December 8, 2013

Pronunciation of a Name

At 1:25, thats how one says Themistoklis (or the more common spelling, Themistocles).


For a more realistic account of history, the History Channel produced a good series. (The link is one of 6 parts on YouTube.)

Friday, December 6, 2013

Kickass jobs data, Looks like 1H 2014 tightening

Great number. Hard for the Fed to ignore.  Based on the last few unemployment rates, the 1st half of 2014 looks like the time for easing of QE.

Wednesday, December 4, 2013

No $goog device in top sellers

Google still has much to prove if they can do consumer hardware. As of now, they are failing. Hard.

-via Fortune article by

Monday, December 2, 2013

Market Thought... the yen and the $spy

The yen started its awesome decline in Oct 2012. 

The Japan equities inversely followed.

Interesting obsevation: the yen is near its low, as equities are near highs. 

Is there enough decline left in the yen to keep the Japan rally going? Why does this even matter? Because the answer looks like it will effect the performance of the SP500.

Data corruption is a problem for automated systems

Case in point, today, Google Finance is producing some funky numbers. 

Automation is nice, but needs constant verification. 

Sunday, December 1, 2013

$amzn dynamic

The stock will continue to rise as the revenue pattern, new quarterly highs, continue.

Powered by being leaders in two proclaimed "trillion dollar" segments, the world's digital mall and web services, the risk to the above pattern seems low (at least for the foreseeable future).

When the pattern breaks, the replacement investment strategy will be worth billions in market capitalization.  The street will need something if revenues become flat while expenses rise. But thats not a problem now.

In the mean time, all seemingly smells like roses.

Friday, November 29, 2013

$yhoo - near 10yr high

At some point, a push back will be seen. The above chart can give a reasonable excuse berween 40-mid 42.

Regardless of the technicals, if Yahoo's new lay-out and interest-graph produces better quality ads, higher ad rates and higher revenue, even around 40, the US property is grossly undervalued.

Tuesday, November 26, 2013

$goog trailing multiple north of 30

It's trailing multiple is well north of 30 from a GAAP and non-GAAP perspective. 

At what point does the market realize it's the 3rd largest US company, by market cap, trading at +30 multiple?

Monday, November 25, 2013

$goog guide to switch is only 14 steps

Android OS is so intuitive it takes 14 steps, as per Schmidt, to convert.

I guess that is better than:

1. Buy a new iPhone
2. Sign in via iTunes/iCloud

Good to go. 14 vs 2. Google math (or Schmidt math) seems awesome.  

Oh, and remember, chrome saves your passwords, so it can be extracted from a third party using your device. 

Also remember that while your logged into your google+ (or gmail) anything you +1, Google can use your prolifle pic in an advertisement across their networks. 

Shit like this that makes me dislike google more and more. 

Thursday, November 21, 2013

$yhoo ooooooo

The general consensus on Yahoo's rise remains to be Alibaba and continued aggressive buyback of shares. 

The problem with the consensus is that Yahoo, as a core internet and mobile property, is grossly undervalued. For those who say the valuation is merited because of the stagnation in the properties are not paying attention. 

The ratings on there iOS mobile apps have been steadily improving.

The one app I think they can totally kick ass on is Finance. Especially given their push to advance their data science side of their business. Unfortunately, Yahoo Finance app is lagging. (Although I like the new web design.)

The revamped web properties performance remain to be seen, but I like them. And especially encouraging is the fact that they are set up to produce an interest graph. With known interest, ads will be at a premium, ad rates rise and higher revenues. 

It's hard ignore what Yahoo is doing. It's also become a pure play on internet and mobile advertising. No concerns about being dragged down by non-core businesses.

The higher demand in non-interest baring convertible offerings this morning is nice indication I am not alone in the above thesis. Probably the most bullish of all investors is Yahoo itself. They have backed up the truck, and have purchased a ton of share. The new announcement maybe their final buy back in a while, given this could be the start of the arbitrage.

Monday, November 18, 2013

2:30? $spy

Wonder what collective decision was forced upon at 2:30pm.

Or did the big guns decide 1800 is too rich right now.

Thursday, November 14, 2013

Market Thought... Final Countdown, updated

The market numbers were updated based on the recent employment numbers and actual Oct unemployment rate.

Projecting an 18 trailing multiple through the end of the year, and trickling lower through 2014. (17.5, 17, 16.5 and 16.5)

Tuesday, November 12, 2013

$goog - losing focus chatter

Increased chatter about Google slipping in core functions.

- poor local results
- Google Maps loosing share

The obvious concern is that the chatter is highlighting poor performance in search related functions. Google is not suppose to suck at search. It is what affords them the luxury of being a hardware manufacturer and compete with pretty much every industry.

To make matters worse, as core functions decline, new initiatives are not picking up the slack. The Motorola acquisition is proving to be a $7b flop. No profits, declining revenue and a patent chest that is not worth $7b. And with the Moto X declining in price, continues to suggest weak demand, Motorola is not going to pick up the slack anytime soon.

Gone are the days of Google as a pure play to internet advertising.

If core functions fade, their 'moon shot' initiatives, failed experiments and luxurious builds will be punished by the street. These initiative will no longer be viewed as 'innovation'. They will be viewed as distractions.

The street is already pricing the stock as a master-of-the-universe-that-conquers their field of entry. But once the street realizes they have stretch themselves out too thin, the stock will be punished.

Negative sentiment can take the stock between 850-925. (Even this move allows for a pretty elevated trailing PE.)

If the stock is to be priced as a company loosing focus, then the trailing PE has plenty of justification to decline below 20.

Monday, November 11, 2013

$FB dynamic

With FB easing, it is approaching interesting SMAs via the weekly chart. 

The 14 and 20 SMA acted as resistance, and may start to act as support. (There is very strong support around 35, but not sure there will be enough negativity to get it there.)

The VC selling has kicked in, with the most firm of supporters selling 30% of their position.  There is also some negative chatter re-forming on the fundamentals.  Not sure yet if the chatter will continue, but Business Insider with their bullshit titles are always entertaining. (A bit of a caveat on the negative chatter, its author is Benedict Evens, and is/was a big proponent of the "unbundling" bearish thesis on Facebook. Needless to say the unbundling thesis has been wrong, and will continue to be wrong.)

If negative chatter keeps up, the 20 SMA may be seen. May provide a nice trade for an oversold bounce.

Wednesday, November 6, 2013

$aapl has leverage

A lot of chatter regarding "deferred revenue" lately.  Mostly because Apple highlighted the potential benefits to be seen in later quarters in the recent conference call.  The gross margin forecast for Q1 was not as high as some analysts were expecting, so obviously questions were asked.  The answer: it will be seen in the March quarter. The degree of benefit was not answered.

As highlighted from a recent Daniel Eran Dilger article, Apple now has a lot of deferred revenue.

With the share buy backs, and now this, Apple has created a potential 50cent swing in earnings power and partial lever on revenue. Its a nice position to be in. (Google used their ability to manipulate their tax rate, Apple now has the above.)

IMO, the current street estimates are already a bit low, and the above levers will help Apple to handle the street.

Also a quick take home:

Another positive sign on gross margin is the cost of the iPad Air. Margins for the device should come in at least 45% (excluding the mini), and given the jump in perceived sales (here, here, and here), Apple has more wind on its back.

$tsla potential trading dynamic

Good numbers coming out of Tesla last night. Free cash flow positive, and margins increasing. Of course the illusion of greatness is now fading, and the reality of "pretty-damn-good" is kicking in, so the market must sell it off. (AMZN will have a cluster-fuck day when it's time comes.)

Tesla' valuation is only limited by ones imagination, but now that it is declining, let's look at a realistic trading pattern. Last time tesla broke its weekly 50sma, it saw about a peak 15% decline from the moving average. 

Assuming the same can take place, if the 20sma is broken from near-term declines, tsla may approach $80-90.

Looking to play tsla on the long side at those levels. Until then, will still look to trade on the short.

Friday, November 1, 2013

$fb to focus the ads

One of the more interesting take aways from Facebook's blowout was the acknowledgement that an increased level of ads played a role in the strong performance. This explained the blowout, and also shows the power of their ability to leverage their properties. Management then proceeded to tell investors they will ease up on the level of ads, and focus on ad quality.

This puts the focus on Facebook's ability for organic growth-per-current ad site. Can Facebook maintain the acceleration, while it removed an earnings lever? (Looks like they have plenty of leverage in their tax rate *like Google*, to manipulate. FB tax rate was 41%!)

Below is q-to-q revenue growth rate.

Regardless to the perception, as a business, we saw a more dynamic Facebook this quarter. Setting itself up well as more ads become programmable and utilizing real-time bidding. Facebook Exchange will really shine over the next few years, and the incorporation to mobile streamlines the process for marketers. 

What's good for the company, may not be good for the stock, short term. The stock is a high-flier. Tough to argue value when it's Market Capitalization is +$100B, and the dynamic of the business was just revealed.

FB broke from its recent sma trend, and shares are due to be for sale.

May lead to a consolidation here. Not sure by how much just yet. An argument can be made around 45. (Looking to re-enter on oversold conditions.)

Wednesday, October 30, 2013

Pass the pipe, dear Fed

"The Committee decided to await more evidence that progress will be sustained before adjusting purchases."

This statement off the heals of 'downside outlook diminished since last fall.'

I am a fan of the Fed, and Bernanke, but this is now the second statement where their verbiage contradicts and goes against economic realities. 

Markets care about the weight of the Fed word. It's an important tool. Especially as we may need it incase China give Asia a credit shock. Thereby hurting the global markets. But statements like today, render this tool worthless.

Their 'monitoring for months' is no surprise, given the 6.5% unemployment rate target. (It must be getting very hard to phrase these statements.)

The biggest risk the fed has now is whether or not the markets get tired of the word smithing. With treasuries selling off, and equity markets declining, that risk  maybe very real. 

(Although at current levels, both treasuries and equity markets, were expecting a lot.)

Tuesday, October 29, 2013

$aapl controlling street expectations

Apple has regained control of the street's expectations, and are now firmly showing eps growth expectations again. 

The discounted multiple should be no more. Expecting AAPL to trade with a 14-15 trailing multiple. (Conservative given it is below market multiple.)

Sunday, October 27, 2013

Market Thought... Final Countdown

Its the F-i-nal C-ou-nt Down!

Earlier in the year, the tea leaves were projecting the markets would enter a new trading multiple, pushing to the high-end of the historic 15-17 trailing price-to-earnings (SP500) range.

The markets are pushing that high-end range to the limit. The SP500 for the June quarter and September estimates were taken down (for the reported earnings), and with the revision, the trailing multiple is near 18.

In September, the Fed's meeting minutes were pretty dovish. Surprising given the job data. But if taken at their word, no "easing" until the 6.5% Unemployment Rate target achieved, the markets should enjoy about 9 months of 'higher' multiples.

Markets rarely wait for news. Most of the time they anticipate, and the anticipation is usually a few months ahead.

After the Fed's green light in April, the markets started to push forward with trailing multiples touching near 18. 

When factoring the projected Q4 SP500 eps, the markets are currently pushing near 18 the estimated earnings. (The below graph highlights a year-end target of 1719 with eps of 98.28, allowing for a multiple of 17.5.)

The markets are already near the high-end.

From a trading pattern perspective, the SP500 is at a level that merits caution.  The first half of 2014 may stall due to the actual shift in tone from the Fed. (Can't ignore the data forever.)

In the above SP500 model, March has a trailing multiple of 17, while the rest were given a 16 due to the the easing. (Being conservative for now.)

The big $$$$ question is 'when'.  When will the markets care?  Based on the previous and projected drop of the Unemployment rate, probably some time in late Q1 - early Q2 2014. 

Friday, October 25, 2013

clock work $amzn

Revnues acceleration

Cash generation

Gross Margins

GM incorporating fulfillment and tech spending at a low.