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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.