The Stock Market and Investing

cyclone4

It will start to restore my faith in the government if they knock this SOB and his company down. I wouldn't be surprised if Hollywood makes a great movie (ending with Cohen's suicide) out of this story. There are lots of others who the Feds should go after as well.

anthonyp

Hi Charlie

Long time-------I hope Amazon pulls off their gambit....I use them for the books, and also to check out some products I am thinking about buying...They have a good service, and are addressing the annoyance of having to be home to get the package...

I also further hope aapl addresses the shareholder problems they have ...I`m still hanging in there with you, and have notices a tiny bit of effort on their part to be a little bit more inclusive.....They need to be alot more inclusive imo ...The likes of Coehn then would have their underhanded insider shenanigans muted, as we all would be able to make decisions on what we know.....Not what we have been lead to believe......Hope your summer is progressing smoothly, and you are keeping an eye out for hurricanes....Tony

ljflx

Charlie,

That's their future multiple. They don't have a multiple. They lose money and have a much larger than that negative cash flow. I love to buy from Amazon but only because they probably lose money on everything I buy. The moment they raise prices I'm gone. Almost everyone I know that buys from Amazon feels the same way. I actually like to buy heavy to ship items and always get free shpping. I'd much rather those items get delvered to my front door rather than carting them thru parking lots. I do the same with Leslie's pools. I buy 100 lbs of chlorine from them at the start of every summer. With Amazon I'm convinced that they are trained on what to say on every conference call and the hedge funds just keep buying into it. They miss every earnings and they lose more and more on everything they sell. The digital delivery with the higher margins is their new act. The one before this was the warehouse expansion, which have now been added onto for years and have produced zilch. Warehouses get capitalized onto the Balance Sheet, either as a capital expenditure or as inventory for stocking. They don't get expensed in the P&L. Yet all you read was that the expansion caused greater expenses and the earnings misses in the past. That's pure BS.

gagrice

I would think the massive expansion of warehouses in CA and other states would be part of the negative cash flow. I know for me their customer service is second to none. I buy a lot of DVDs from Amazon.UK. They are cheaper with shipping than the cut US versions of their excellent mysteries. I don't think I would buy their stock, but wish them well.

ljflx

Negative cash flow - yes. But P&L - no. Inventory becomes a short term asset and the warehouse building becomes a fixed asset with long life depreciation. Personnel hired to build warehouse related stuff gets capitalized or deferred. Basically the P&L expenses are set up to offset revenue. The lack of profits means they are undercharging and don't have the belief yet that they can upcharge. The digital that they are now using as a scapegoat is the next generation of delays to reporting numbers people expected. But Wall street seems to have total forgiveness of Amazon's bad numbers. But when the retail investor wants in that's when they'll get out. A stock like Amazon is proof that you need to bet on which way hedge funds are trading. Knowing how to analyze fundamentals and seeing a stock that has them doesn't mean much anymore. That stuff has value in how to trade the whole market which is why I'm almost purely a funds buyer now.

ljflx

One stock that was a great buy a year ago was Bed Bath and Beyond (bbby) This along with Apple and Nielsen are among the few stocks I own and hold long. The latter one is my industry and I had little doubt when it went public that it would rise 40% so I bought it around $25. BBBY got hammered to $58-$59 in a few days on hedge fund fear on threats from Amazon. It had been at $70. I've been in it for years and had sold about half my position before it got hammered. This stock returned 25% virtually every year. It was not as good as Apple in the boom years but it was probably safer. I should have bought more shares when it got hammered but I didn't. But I'm awfully glad I didn't panic and sell as the half I didn't sell is a large position. Now about 12 months later the stock is up about 35% from a selloff that bottomed around $55 last Autumn if I remember right. This has always been a great stock to have. That's all I do now is look for great safe stocks to hold. Apple I'm not sure about anymore. It's definitely set up by hedge funds to run back into as soon as they get early inside info about a new product release, The stock will soar immediately by 30-40% IMO when the hedge funds discover that. BBBY is safer though because it has steady growth and great earnings and is much more of a fundamentals play.

cyclone4

Tony,

Don't get me wrong. I use Amazon for lots of purchases. All I'm saying is that there is NO justification for this stock to be trading at these levels with horrible earnings reports quarter after quarter. I think it is at least $150 too high.

As for Apple, hopefully, the worst is behind it. But I've been fooled on it so many times, I am no longer making any bold predictions. Let's see how the investors react to new products this fall and in 2014. I would think it's going to be very positive.

ljflx

Tony,

Be very careful if you buy Amazon. It's probably a phenomenal stock to short if you are into that. The stock has no support whatsoever at it's current price. Heck it has no support at 40 or 50% of its current price. This article shows has the stock should be in freefall right now. IMO you have some hedge fund collusuion going on right now ahead of a big fall that's almost imminent. They are probably trying to hold near the current price for awhile, get some late retail support and then start to exit out. I have no trust in ethical business being conducted on Wall street with stocks priced as absurd as Amazon is. The company plays to Wall Street and is going to get burned badly. How can you be building warehouses and be going digital at the same time? The warehouse expansion is pure retail and it means the speculation in the stock at 170-180X future earnings is on razor thin margins and is 10-12X more than anyone else pays for a retailer. Totally crazy stock price. This article captures it very well.

http://beta.fool.com/jacobsteinberg/2013/07/29/amazon-do-profits-even-matter/418- - 35/?source=eogyholnk0000001

anthonyp

Thanks for the thoughts about Amazon, both Len and Charlie

I`m not going to buy the stock, because both it and aapl are so strangely manipulated ..So for me I am just working on a position in the mutual funds I mentioned..Vanguard

I`l only take a position in a single stock, if it for some reason it take a meaningful dip---sort of like JPM-- Seems to me that most individual stocks have a run then a long wait until something else happens..Just an overly difficult market to invest in..

With the new tax schedule , anything less than long term, you loose half the gain you so difficultly made.......Lord help you if you were to make a mistake and loose anything.....Very small write off......Give half if you win, get nothing back if you loose.....Nice for the government... Tony

anthonyp

Man this market looks strong, and aapl is acting nicely :-) .I read more positive development from the government concerning the abusers Nice Tony

ljflx

With 27-30% gains so far this year I'm thinkng about taking some money off the table. You've got to think the easy money has been made. But I don't see a reason to sell. Earnings are good, growth overall is happening gradually rather than at once so that gives you a more prolonged and steady rise and companies are super efficient with extremely strong Balance Sheets and cash positions. What it tells me is the correction to the downside so many years ago was far too emotional and way overdone.

circlew

I agree. If Europe grows slowly and China moderates, another 20% gain over the next 12 months is not out of the question. afaic.

anthonyp

I guess that correction you mention, is still remembered pretty well, at least by me ......The last correction a month or so ago, was the emotionally one.....It was quick and brutal......

I`m positioned ---not to my liking---but safely right now, and because of that, the market is begrudging any reasonable entry point.....I think alot of people are in my shoes, so a correction may not be as deep as I would expect due to the money on the sidelines.....Just a thought....and further the funds are very easy to sell...Tony

cyclone4

The ruling against Apple for a standard patent has been overturned by the White House. I think this is definitely the right decision. Samsung was being totally unreasonable in what it tried to do with this the past few years. I am really happy to see this.

http://www.ft.com/intl/cms/s/0/7321bf0a-fc6b-11e2-95fc-00144feabdc0.html#axzz2aw- FnTe61

gagrice

Is Apple still manufacturing the old iPhone 4? Or are these phones that have been traded in and refurbished. I can't imagine building obsolete models. Here is more of the story:

http://news.cnet.com/8301-13579_3-57596877-37/obama-administration-vetoes-apple-- sales-ban-in-u.s/

cyclone4

Is Apple still manufacturing the old iPhone 4? Or are these phones that have been traded in and refurbished. I can't imagine building obsolete models.

I doubt they are still manufactured but I am not certain. In any case, it is important. Otherwise, Apple would not have fought this "battle".

houdini1

No, not manufacturing those older phones...but many cell phone providers are still selling them.

robr2

No, not manufacturing those older phones...but many cell phone providers are still selling them.

My understanding is the Apple is still manufacturing the 4 and 4S and will do so until the next generation is offered later this year. Its technology may be "old" but it's cheap to make and cheap for carriers to give it away to customers in exchange for that profitable 2 year contract and Apple can count another phone sold.

Further, the 4 and 4S are the latest and greatest in emerging economies where Apple can win customers - hopefully for life.

cyclone4

Here is an Apple story from the NY Times that I find rather intriguing. Strong iPad sales also help the competition and vice-versa.

http://bits.blogs.nytimes.com/2013/08/05/with-no-new-ipad-tablet-market-takes-a-- dip/?partner=yahoofinance&_r=0

cyclone4

Here is a good summary of 3 separate legal battles yesterday. In the case to ban certain Samsung phones for patent infringement, I agree with the author that it is unlikely that the President will veto the ban just because he vetoed a ban on older iPhones. There is a huge difference between standard essential patents and Apple's patents.

http://tech.fortune.cnn.com/2013/08/10/apple-samsung-ebooks-itc/?source=yahoo_qu- ote

gagrice

Too bad Obama is not as concerned with the food we get from other countries, as he is with protecting Apple. Why didn't he tell the WTO we do require Country of Origin Labeling on our foreign foods.

The whole Apple Samsung P***ing match is so silly. It does not take a rocket scientist to see that Samsung products are superior to Apple's. So who copied who? Who gives a rip? Buy whichever you like. If Obama wanted to help our economy he would slap a 50% tariff on ALL consumer electronics coming into the USA. Give American workers a shot at the popular Smartphone/tablet market.

ljflx

"The whole Apple Samsung P***ing match is so silly. It does not take a rocket scientist to see that Samsung products are superior to Apple's. So who copied who?"

Are you kidding me? Where is your logic? Who created the first smart phone? Who created the first tablet? Who followed? Sorry Gagrice but you must live in the bizarro world if you believe what you wrote.

BTW - I must need a rocket scientist badly - because I don't see it.

gagrice

I am going by those that have owned both. There is no comparison. Samsung Smartphones and tablets are better. I played with all the tablets for over a year before I bought my Samsung Note 10.1. I took it back for a refund and bought the Samsung Note 8.0. It is a lot more tablet than the iPad Mini. iPhones are probably simpler for the non technical types. They don't compare in Apps, size, brightness and versatility. Let me know when you break away from the addiction to Apple. I refused to be screwed by Apple again. They got me in the 1980s with their original Macintosh. A year later I bought an Atari 1040 ST color computer and never bothered with the Mac again. Yes they have made some dandy products. Only because of Steve Jobs. He is dead and Apple will follow. Though with that much cash it will take a lot of time. Vision is something that money cannot buy.

Tough being the only non Apple fanatic on a thread.

gagrice

Something else to think about is the China Market. It has by far the largest potential in the World. Looks like Apple is going to have lots of companies to sue.

Tim Cook’s talks with China Mobile have just taken on some more urgency. Bloomberg reports that research firm Canalys has just found that the iPhone’s market share fell to just 5% in China in the second quarter of 2013, down from 9% in Q2 2012. Nicole Peng, Canalys’s China research director, tells Bloomberg that Apple is getting walloped by low-cost Android phones being pushed by vendors such as Lenovo, ZTE and Xiaomi, which have all been peddling dirt-cheap smartphones with surprisingly strong specifications.

http://news.yahoo.com/iphone-market-share-china-falls-just-5-004559450.html

Tim Cook has come under greater pressure from Apple’s board of directors to speed up the company’s pace of innovation, Fox Business Network reported on Thursday. In particular, Fox Business said that the board is “now worried about what’s in the pipeline” for the company and is concerned about whether it has enough “innovative stuff to keep the momentum going.” This report comes at a very interesting time for Apple, which has been very quiet throughout most of 2013 but is also preparing an army of new products to launch in the fall.

http://bgr.com/2013/08/09/apple-ipad-mini-retina-display-analysis/

ljflx

I have Samsung products that have stunk. I have Apple products that are great and give me everything I want and need. I go by experierence, not by others opinions. My whole family has Apple and no one wants anything different going forward. 100% satisfaction across the board from phones to laptops to tablets to music players. Where we mix is PC's with both Apple and Microsoft.

gagrice

I see Apple as the 5%ers go to products. The other 95% are more interested in bang for buck. And the latest figures bear that out.

Apple is facing a slower boom in the smartphone and tablet market, due in no small part to a lack of new product announcements. According to new reports from research firm IDC, Cupertino has lost ground on Google's Android mobile OS while tablet sales have decreased without the unveiling of a new iPad.

A total of 236.4 million smartphones shipped in the second quarter of 2013, a 51.3 percent increase from the same period in 2012. But the iOS portion of the smartphone marketshare saw a 20 percent increase, compared to the 73.5 percent jump of Android, and a 77.6 percent increase year-over-year for Windows Phone.

Of course, Android has remained the dominant mobile OS for some time, but the considerable increase for Windows Phone is attributed to new products from Nokia. Apple has yet to announce a new smartphone since the iPhone 5 a year ago, a clear explanation for the sluggish increase in sales.

http://www.ign.com/articles/2013/08/07/lack-of-new-products-slow-apples-tablet-a- nd-smartphone-marketshare

cyclone4

All I have to say to you at this point is talk to me around December 31.

gagrice

If the iPad Mini comes out with a decent display this Fall, I will buy and make my own comparisons. I will let you know. I love that size tablet. Did not care for the 10 inch Note, just too big.

tlong

The new Nexus 7 tablet has a retina-level display and is much better than the iPad mini at a much lower price. I have the previous version and it is even nice.

No need to pay iPad mini prices unless you must be in Apple's ecosystem.

kyfdx

I have a Google Nexus 10, which is more or less a clone of the Samsung... I thought I wanted a larger tablet, as well... but, after my son got his iPad mini, I now wish I had that size...

Not an iPad necessarily, just that 8" size...

houdini1

The 8 inch ipad mini size is the main reason I have one. That size seems to be just right. My 7 inch kindle just seems too small and the 10 inch ipad was too big.

sanjaysdca

I have really enjoyed tour post and insight.

However, first time in last four, year I think your logic is little off base.

We (America) invented manufacturing how much is left here?
We invented LCD..now there is no research or manufacturing of LCD in USA.
Next gen display products are coming from Asia not US.

Yes we invented smart phones...
Yes samsung followed.....but Samsung is executing it better.

dieselone

"I have Samsung products that have stunk. I have Apple products that are great and give me everything I want and need. I go by experierence, not by others opinions."

I can't really argue with that. I had the original Galaxy S and it was pretty bad. Currently have an S3 which I really like.

My daughter has an Iphone 4s which she loves and it works well (guess I'll be getting her the next Iphone when ever it's available). I recently purchased her a Macbook Pro and it's very impressive. I like it much better than my younger daughter's Dell with Windows 8 (yuck), granted the Mac cost 3x more.

My wife has the latest Ipad and it's great as well.

So I'm mixed. I like Android on a top notch phone, but I also appreciate the ease of use and exceptional quality of Apple products. Granted you pay for it.

I still primarily use windows 7/pc for personal/business use. So far I really don't like the UI of Windows 8. Waiting to see what the 8.1 update brings before updating my personal PC.

cyclone4

Rather than starting a new topic, here is the latest and greatest news about Apple hot off the press. The stock is surging the past hour.

http://www.marketwatch.com/story/apple-shares-jump-as-icahn-takes-large-position- -2013-08-13?siteid=yhoof2

robr2

So I'm guessing that Icahn's conversation with Tim Cook had something to do with how best to unlock the cash that Apple has hoarded for the benefit of Icahn. I'll venture the threat of a very public fight was mentioned.

Make no mistake - when Icahn takes an interest in a company, it's not some sort of altruistic move to benefit the shareholders. It's all about what is best for Icahn. Short term, the stock will move up. Long term, the business as a whole may be destroyed.

hpmctorque

Which companies has Icahn destroyed?

anthonyp

We are ecstatic today....In a little while I might get even :-) ...long miserable time for me Tony

robr2

Which companies has Icahn destroyed?

Well destroy was a bit extreme.

Icahn is a professional activist investor and is usually only interested in the short term by bullying his way into control of the company or board. He then looks at unlocking some sort of value through breaking up the company and then selling it off. He's not about creating new products or even corporate strategy. It's all about his walking away with a ton of money.

Some of the companies where Icahn was involved and the results during his involvement include:

Blockbuster - 96% share price drop while he was on the board
WCI Communities - 99.8% share drop and bankruptcy during his year as chairman
BKF Capital - 98% drop in share price while his appointees were on the board
XO Holdings - 80% drop in share price during his tenure and a class action lawsuit against him when he altered the capital structure to favor his shares
American Railcar - value dropped 68% under his ownership.
Icahn drained money out of both Motorola and Time Warner and left them weak.

When he gets involved in a company, short term results are great. The stock price rises, he bullies the board to get what he wants and then leaves. In the long term, the results aren't that good because he's gone and is no long an shareholder "activist."

cyclone4

Rob,

You make good points about Icahn. My thinking is that Tim Cook and Company are also brilliant business people and know what's good for Apple and not necessarily for Carl Icahn.

Having said this, I do believe that an even bigger buyback program (or dividend increase) will be positive for the stock. But, let's face it. The key over the next 6-12 months is the rollout of new, impressive products. I believe in the Company and I believe they will once again deliver in a big way, Carl Icahn aside.

cyclone4

Ecstatic indeed Tony. Perhaps the worst is now behind us.

cyclone4

Here are two brand new articles about the Icahn/Apple connection. This is very bullish at this point. We all need to give Len some kudos because he has been preaching for almost a year now that with this ever growing cash hoard, it makes zero sense for AAPL to have traded to those absurd low levels and that Apple could and should have a big buyback program.

http://finance.yahoo.com/news/billionaire-carl-icahn-says-apple-212336189.html

http://blogs.wsj.com/moneybeat/2013/08/13/icahn-on-apple-buyback-would-boost-sha- res-to-625/?mod=yahoo_hs

robr2

But if Icahn gets them to distribute the $150 billion he thinks they can (via borrowing), then the price of the stock shall be lower than the $700 price point he feels they should be at.

gagrice

So if Apple borrows here to buy back stock. And tries to pay it back with some of the $100+ billion off shore wouldn't they be stuck with a huge tax bill?

robr2

Well they could try to pay it back with US based cash flow but they need that for produt development if the want to keep saying "Designed in California."

kyfdx

Or..they could borrow the money for the buyback from their offshore subsidiary, then pay the interest to that offshore subsidiary, further reducing their US profits (and taxes).

It's the American way..

hpmctorque

I don't doubt that Carl Icahn is more interested in personal gain than product development or the long term future of the companies in which he invests, but that in itself doesn't mean his involvement is a net negative for the industries, or even the companies in which he invests.

As far as I can tell, most of the companies you cited had serious structural and management problems, operated under an unsuitable business model before Mr. Icahn became involved. They were on a downward trajectory, or not achieving their potential, and needed a shakeup from outside the management. In the case of Blockbuster, for example, its business model was superseded by Netflix cable and .

I'm not knowledgeable enough to comment on WCI Communities, BKF Capital, XO Holdings and American Railcar, but did Icahn profit in each of these cases, while shareholder value eroded? Also, were there not some examples where his involvement was positive for the company, even for the long term?

robr2

In the case of Blockbuster, for example, its business model was superseded by Netflix cable and .

From what I've read, Icahn became involved with Blockbuster when it was trying to move from a brick and mortar operation to more of a Netflix business model. Icahn was enamored with the B&M operation because he would have to wait in line to rent DVD's at his local store. He looked at the B&M stores as an advantage - his take was that Blockbuster online customers could pop down to a store and exchange their DVD if they didn't want to wait for the mail.

I'm not saying that Icahn is the coming of Satan. Personally, I don't think he offers much in the way of long term comfort. He's already said that Apple could pay out $150 billion in cash by borrowing and still maintain a $700 price level. IMHO, that shows me he is interested only in unlocking that cash.

hpmctorque

I can agree with your nuanced second paragraph. It's difficult to add to this discussion because we'll never know what would have happened with Blockbuster and the other companies you cited if Icahn hadn't gotten involved.

gagrice

There are still a few M&P video stores in rural areas. Most VHS tapes are now at the Goodwill selling as cheap as 10 cents. I think the Achilles heel for Netflix will be postage. With Internet delivery gaining momentum. I thought CDs to be the ultimate in Music delivery. I doubt they will be sold in 5 years. DVDs cannot have much longer life than CDs. I loaded over 2000+ MP3 tunes onto an SD card to load into my SUV entertainment HD. Took less than 10 GB. No more CDs in the vehicle, Yippee..... I don't own an iPod type device, or that would have worked as well. I love having all my music accessible by Artist, Album or Genre. I have ripped and backed up every CD I bought for over 15 years. Whenever the first CD writers hit the market. So my original CDs are all like new.

That said, I see technology as self destructing. How much longer can companies like Apple make devices we just have to have?????

imidazol97

A long quote, but typical of Icahn's maneuvers.

"TWA's holding company, Trans World Corporation, spun off the airline, which then became starved for capital. The airline briefly considered selling itself to renowned corporate raider Frank Lorenzo in the 1980s, but ended up selling to yet another corporate raider Carl Icahn in 1985. Under Icahn's direction, many of its most profitable assets were sold to competitors, much to the detriment of TWA. Icahn was eventually ousted in 1993, though not before the airline was forced to file for bankruptcy in 1992. Icahn emerged unscathed. TWA moved its headquarters from Mt. Kisco to the former headquarters building of McDonnell Douglas in St. Louis soon after Icahn left.

1995 bankruptcy[edit source | edit]When Carl Icahn left in 1993, he arranged to have TWA give Karabu Corp., an entity he controlled, the rights to buy TWA tickets at 45 percent off published fares through September 2003. This was named "The Karabu Deal."[16] The ticket program agreement, which began on June 14, 1995, excluded tickets for travel which originated or terminated in St. Louis, Missouri. Tickets were subject to TWA's normal seat assignment and boarding pass rules and regulations, were non-assignable to any other carrier, and were non-endorsable. No commissions were paid to Karabu by TWA for tickets sold under the ticket program agreement.


At its heyday TWA operated a fleet of 747-100 aircraftBy agreement dated August 14, 1995, Lowestfare.com LLC, a wholly owned operating subsidiary of Karabu, was joined as a party to the ticket program agreement. Pursuant to the ticket program agreement, Lowestfare.com could purchase an unlimited number of system tickets. System tickets are tickets for all applicable classes of service which were purchased by Karabu from TWA at a 45 percent discount from TWA's published fare. In addition to system tickets, Lowestfare.com could also purchase domestic consolidator tickets, which are tickets issued at bulk fare rates and were limited to specified origin/destination city markets and did not permit the holder to modify or refund a purchased ticket. Karabu's purchase of domestic consolidator tickets was subject to a cap of $70 million per year based on the full retail price of the tickets.

On most TWA flights, Karabu could buy at a heavy discount and then sell a certain portion of all TWA's available seats. As a result, TWA was hamstrung by the high proportion of heavily discounted seats that had been pre-sold and was essentially left with no control over its own pricing. It could not afford to discount any of its own seats, and if TWA wanted to increase revenue on busy routes by putting a larger plane into service, Karabu would only claim more seats. It is estimated TWA was losing around $150 million a year in revenue with this deal.

In trying to ameliorate the Karabu deal, TWA went in and out of bankruptcy in 1995.

http://en.wikipedia.org/wiki/Trans_World_Airlines