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Best Ideas Portfolio Holding eBay Flashed a VBI of 10 and Has Never Looked Back

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Valuentum members have been blessed by the good fortunes of eBay (click ticker for report: ). The firm has been one of the best performers in the entire market after it registered the very top rating of 10 on the Valuentum Buying Index (VBI) in September 2011. Very few firms ever score a 10 on the VBI, so when a company does, members take close note. Google (click ticker for report: ) was the most recent firm to do so, and it has since rocketed to new all-time highs. In most cases, we tend to add firms to our Best Ideas portfolio when they register a 9 or 10 and remove them when they register a 1 or 2 on … Read more

Why GameStop Looks Like a Value Trap

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At Valuentum, we pride ourselves on a multi-faceted investment methodology, acknowledging that several market-movers view any given investment from different perspectives. That is precisely why we’re staying away from shares of GameStop (click ticker for report: ), which scores poorly on the Valuentum Buying Index (our stock-selection methodology). Let’s take a look at why we don’t like the company. Changing Dynamics of Gaming Culture One of the unique features of the video game market has been the relatively liquid buying and selling of games. Since the days of FuncoLand (which was eventually acquired by GameStop), consumers could purchase and sell games new or used, and the game shops would help facilitate this market. Have a copy of Nintendo’s Super Mario that … Read more

Could the FCC Hurt Carriers’ Profits?

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Reports have surfaced that the FCC wishes to create a free, nation-wide WiFi network in order to facilitate web and cellular traffic. Though plans are only in the initial stages (and we are not jumping to any conclusions), the government could provide the US with a high-speed network at no cost, helping to put the nation on par with the Internet service achieved in several other countries. The news does not alter our fair value estimates for companies in our coverage universe, pending new details regarding probability and timing of implementation. Understandably, the companies that currently own spectrum and experience fantastic returns on networks are a bit upset about the possibility. The high margins achieved by wireless operators Verizon (click … Read more

Amazon Reports Strong Sales Growth

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Online retail kingpin Amazon (click ticker for report: ) reported strong sales growth during its fourth quarter. Revenue jumped 22% year-over-year to $21.3 billion, slightly below expectations, but still strong. Earnings, as is the norm for Amazon, missed the mark, falling nearly 50% year-over-year to $0.21 per share. Although classic value investors and growth investors alike remain baffled by Amazon’s current price-to-earnings multiple (the firm posted a net loss for 2012), we do not think multiple analysis really tells the story at Amazon. Nor does near-term free cash flow, which was 81% lower on 7% higher operating cash flow during the period. Amazon is investing for the future, and given its current sales pace, we think the market is pricing in a dramatic rise in … Read more

Strong Holiday Sales Boost Toy Makers

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Between the rise of video games and the popularity of cell phones and tablets among children, one might expect the US toy industry to be experiencing a robust decline. However, according to NPD, holiday sales were strong enough to propel the toy market to $16.5 billion in sales during 2012, down just $100 million compared to 2011. The report claims dollar sales and unit sales surged 18% and 10%, respectively, during the final two weeks of December, driving sales 1.3% higher year-over-year for the busiest month of the year. Leapfrog (LF), which focuses primarily on educational toys, topped the ‘best-selling toy list’ with 4 out of the 10 best sellers as well as 3 out of the top 4 (including the … Read more

Superb Growth Continues at Best Ideas Portfolio Holding eBay

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Not surprisingly, fantastic growth continued during the fourth quarter at Best Ideas Newsletter holding eBay (click ticker for report: ). Revenue surged 18% year-over-year to $4 billion, a touch better than consensus expectations. Earnings per share, on a non-GAAP basis, grew 17% compared to a year ago to $0.70. We continue to like this holding of our Best Ideas Newsletter portfolio. The continued resurgence of the core eBay business continued uninterrupted, as revenue surged 16% year-over-year to $2 billion, which coincided with 16% gross merchandise volume growth ($19.1 billion). While PayPal grabs all the headlines, the performance of eBay’s marketplace has been fantastic over the last several quarters. The eBay marketplace, in our view, has reached a similar positioning as … Read more

Best Buy’s Holiday Sales Were Solid; Margins Are the Issue

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This morning, the maligned big box electronics retailer Best Buy (click ticker for report: ) provided updates on its holiday sales results, which were relatively strong, in our view. Breaking the downward spiral, same-store sales in the US were flat compared to last year, but continued to decline internationally, down 6.4% year-over-year. However, overall sales declined to $12.8 billion for the 9-week holiday season compared to $12.9 billion for the same period last year, suggesting overall business was fairly solid. Consistent with trends throughout 2012, consumer electronics were weak, while ‘Computing and Mobile Phones’ revenues surged. Source: Best Buy Holiday Sales Report, Valuentum Consumer electronics, largely comprised of TVs, has been weak and probably will continue to be until we see … Read more

Can Eddie Lampert Turn Around Sears?

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Earlier this week, Sears (click ticker for report: ) CEO Lou D’Ambrosio announced that he’ll resign from his position in February due to an illness in the family. Not so surprisingly, Sears chairman and hedge fund titan Eddie Lampert will be taking the reigns as CEO. Lampert, who merged Sears and Kmart several years ago, will be the chief executive for the first time, and as far as we can tell, he seems confident in his ability to turnaround the failing retailer. In an interview with the Chicago Tribune, Lampert cites Jeff Bezos’ success as a finance guy turned retailer leading Amazon (click ticker for report: ) as evidence that he can turn the dying company around. Although he hasn’t … Read more

We Take a Deep Dive into the Future Prospects of Best Idea Google

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Before the meteoric rise in the price of Apple (click ticker for report: ), Google (click ticker for report: ) stole most of the tech-stock headlines and, according to some, was pretty much a sure bet to become a $1,000 stock. However, looking under the hood, the company has had some turmoil during the past few years. In addition to bringing back founder Sergey Brin as the CEO, the company has created the world’s most successful mobile operating system to date (Android), a social network with over 100 million users, and failed to purchase Groupon (click ticker for report: ), which at the present seems like it was a blessing. Additionally, the company is working on cars that drive themselves, shuttered Google Wave … Read more

Solid Cyber Monday

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According to IBM Digital Analytics, Cyber Monday sales surged 26.6% year-over-year and are expected to total $1.5 billion. These results were consistent with our previous belief that the online channel would continue to become a more important retail destination, though we’re a bit surprised that growth was so strong on one day (since we’ve seen retailers run a variety of sales all week long). Two of the big winners yesterday appear to be Amazon (click ticker for report: ) and eBay (click ticker for report: ), where sales volumes increased 52% and 57%, respectively. Sources cite the percentage of retailers participating in Cyber Monday sales at 97%, or almost every company that sells products on the Internet. It’s not easy to … Read more