AAPL

Thinking Out Loud

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I remember when I was fresh out of my undergraduate studies. I applied for a sell-side equity research position. I interviewed with a head sector analyst, and I remember the first question oh so well: What is a gross margin? It was strange. I couldn’t tell if he was joking or not. Of course I knew what a gross margin was, but was this a trick? The interview couldn’t be this easy, right? Well, after responding that a firm’s gross margin is revenue less cost of goods sold divided by revenue, let’s say that he was impressed. But I wasn’t sure why. To me, understanding what makes up a gross margin or operating margin or free cash flow margin or … Read more

Is Apple Worth More Than $200 Per Share?

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Possibly. But we do think Apple’s stock is cheap. $727 billion. $727,000,000,000. That’s Apple’s (AAPL) market capitalization as of the close of business February 11. It’s hard to put such a huge number into perspective, but it amounts to roughly the market caps of the next two largest companies on the US market, Exxon Mobil (XOM) and Microsoft (MSFT), combined. From our perspective, Apple is finally getting credit for its sprawling and near-impenetrable ecosystem and dominance in converging technologies from the iPhone to the iPad to wearable devices. In his latest open letter that’s making headlines, Carl Icahn upped his fair value estimate of Apple to $216 from $203 due in part to higher-than-previously-forecast earnings estimates for the current fiscal … Read more

Apple’s Powerful “Valuentum-style” Attributes Remain

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We were expecting “an absolute blow-out holiday quarter for Apple,” and the company did not disappoint. Revenue growth of ~30% and earnings per share of $3.06 (up ~50%) blew by analyst expectations and set new records in its fiscal first quarter, as the tech giant sold an all-time quarterly best 74.5 million iPhones, simply a monumental number.   Was there really any doubt that Apple (AAPL) was going to beat expectations?    The iPhone maker’s “Valuentum-style” attributes also remain intact. We talk quite a bit about the importance of combining both valuation and technical/momentum qualities in individual equity analysis, and perhaps the best example of any idea we’ve added to the newsletter portfolios showcasing the efficacy of such a process is Apple.   … Read more

Why Don’t They Get It? Process Is More Important Than the Companies You Select

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Case Study: Apple (AAPL) July 24, 2013: “We added to our position in Apple. We think the shares are significantly undervalued, and we’re seeing some re-affirming market action following its strong quarterly report… (source).” The chart of Apple and the philosophical illustration below show how using the Valuentum process helped maximize profits in Apple within the newsletter portfolios. While others were still unsure whether Apple would come to reflect its intrinsic value and sat on the sidelines, a powerful technical breakout gave us all the incremental information we needed on this underpriced idea to add more shares to the Best Ideas portfolio. We also opened a new position in the Dividend Growth portfolio at that time. This particular breakout–when a … Read more

RadioShack Files, Blackberry Flies Then Denies

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The end is nigh for RadioShack (RSH). After years and years on its path toward obsolescence, RadioShack may be finally throwing in the towel. The Wall Street Journal reported January 14 that the electronic gadget store that shares its name with the technology of yesteryear is prepping for a bankruptcy filing as early as February. The penny stock once traded north of $20 as recently as a few years ago, and forever, Radio Shack will be an excellent example of why share buybacks aren’t always a good thing. Should RadioShack sign the bottom line sealing its fate, there are a few things that could happen with the equity. The first is obvious. RadioShack’s equity will be cancelled at the end … Read more

Reiterating Our $100 Per Share Valuation of Facebook

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Summary: We think Facebook has just scratched the surface of its earnings potential. Let’s address the potential for a single stock bubble in Facebook, the company’s most recent results, and why we think it garners a very attractive Economic Castle rating. We value shares of Facebook at $100 each, implying roughly 25% upside based on the firm’s most recent closing price. ———- “Intrinsic value represents the conclusion to any and all stock research: What is the company worth? DCF valuation captures the expectations of a firm’s competitive advantages, growth prospects, strategic endeavors, and any other qualitative factor. No other process does this. Putting to numbers a plethora of advanced fundamental items in arriving at a fair value estimate is the … Read more

Stocks Catapult Back To Near All-Time Highs

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It appears that we may get a Santa Claus rally after all. Call it window dressing. Call it drinking at the Fed’s punch bowl. Call it what you will. But the Dow Jones Industrial Average (DIA) polished off its biggest two-day gain in six years to propel itself back to near all-time highs again. The S&P 500 (SPY), shown above, is now within throwing distance of setting new record ground, and spirits remain high as we approach the Christmas holiday and New Year. Collapsing prices at the gas pump, though highlighting risks to global economic growth, may be helping to spread the holiday cheer. For clarification, we continue to be optimistic about the future returns in the newsletter portfolios, but … Read more

Valuentum Mosaic Exclusive: Talks Between Yahoo and eBay Probable

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Let’s put it this way: the combined eBay and PayPal entity presently listed under the ticker symbol eBay (EBAY) is cheap. The combined company is trading in the mid-$50s with a market capitalization of ~$69 billion at present, and we value its shares in the mid-$70s (a ~$90+ billion valuation). We’re not the only one, in case you think that, despite everything we seem to get correct, we’re off our rockers with this valuation. Stifel, for example, recently labeled $75 per share as an upside case for the company. eBay remains a holding in the Best Ideas portfolio, and the equity markets are simply getting the company’s valuation wrong, in our view. It is one of the few true bargains … Read more

Thanksgiving Weekend Sales Were Weak…

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According to preliminary survey results released Sunday by the National Retail Federation, retail sales during the Thanksgiving weekend tumbled 11% to $50.9 billion from $57.4 billion during the same weekend last year. Executives are having a difficult time explaining the sharp drop off in retail sales (RTH), given similar aggressive strategies and promotions as previous years, but we think there are a few reasons for the hefty decline. For one, the lure of the post-Thanksgiving “mad-rush” may be wearing off, and the emerging “negative” social stigma of those willing to shop (instead of resting with family) coupled with those who believe they are “being forced to work” during the holiday (see Walmart strike) without fair wages may be turning off … Read more

Happy Thanksgiving! 5 Entrepreneurs To Be Thankful For!

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By Brian Nelson, CFA “Global Entrepreneurship Week” was November 17-23 this year, and the U.S. Congress continues to work diligently to establish the third Tuesday in November a national holiday celebrating the contributions of entrepreneurs to the U.S. as well as “honor those entrepreneurs who ignite innovation and inspire the next generation.” Today, this Thanksgiving, we wanted to celebrate the contributions of 5 entrepreneurs to be thankful for this holiday season. Feel free to add your favorite entrepreneur to this list as well and any obscure fact you want to share about him or her. The list is not meant to be comprehensive, but entertaining and educational. Please don’t forget to answer the bonus question below. Be sure to enjoy … Read more