GOOG

Google’s Cash Is Real

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Which company ended 2014 with total cash of $64.4 billion and short and long-term debt of $5.2 billion? If you read the title, you can probably guess it without much difficulty: Google (GOOG, GOOGL). Focusing purely on beats and misses of accounting earnings-per-share ignores one of the most important financial statements: the balance sheet. Not considering the financial health of a company, and specifically a firm’s net cash position (its total cash less total debt) is similar to ignoring an individual’s savings account and obligations when calculating his/her net worth. It just doesn’t make any sense. Yet, the industry loves throwing multiples on accounting earnings with little regard to a company’s net cash or net debt position. Mr. Market’s love … 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

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

A Sneak Peek at Valuentum’s Slides for the AAII Presentation in Chicago This Saturday!

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Let’s take a sneak peek at President Brian Nelson’s slides for this weekend’s presentation in Chicago! Firms mentioned: MSFT, GOOG, AIR, BRCM, CSCO, SPY, AAPL, QCOM, MA, DPZ, SVU, RNDY, DDE, STRA, EXC, CLF, PBI, CTL, JCP and others. <select image to download the slide deck>

Google’s Competitive Advantages As Strong As Ever Following Third Quarter Report

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Consensus estimates aside, Google (GOOG, GOOGL) issued a very strong third quarter Thursday. The firm reported consolidated revenues of $16.52 billion in the quarter, an increase of 20% on a year-over-year basis. Non-GAAP operating income for the period was $5.36 billion, which compares to non-GAAP operating income of $4.62 billion in last year’s quarter, an increase of 16%. Non-GAAP EPS in the third quarter of $6.35 advanced 12.8% over the $5.63 mark in the prior-year period. Much like that which occurred in eBay’s (EBAY) third quarter, which it reported earlier this week, operating leverage was absent in Google’s business model during the period. Google’s bottom-line growth rate was still solid, but we would have liked to see earnings growth in excess … Read more

Performance of the Valuentum Buying Index

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Note: A more recent analysis of the Valuentum Buying Index rating system can be accessed at the following link: /Value_and_Momentum_Within_Stocks_Too Two separate studies have reinforced the efficacy of the Valuentum Buying Index, both as a portfolio optimization tool and as an idea generator. If you cannot view the video, please consult the transcript that follows. To view Valuentum’s updated YouTube page, please see here.  The studies referred to in this video can be accessed as follows: Why Valuentum Buying Index Ratings Matter: /20141003_1 Valuentum’s Performance on Seeking Alpha: /20141009 Please be sure to read the studies closely in addition to watching the video or consulting the transcript below. Brian Nelson, CFA: This is Brian Nelson from Valuentum Securities. I’d like to talk … Read more

Starboard and Yahoo

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The Marissa Mayer hype has been exciting and refreshing. But with Mayer and the executive suite having done little to turn around the core operations of Yahoo (YHOO), and more recently snubbing talks about tying the knot with AOL (AOL), the time may be ripe for a shakeup. Activist investor and investment management firm Starboard Value thinks so. In an open letter to Mayer and the board of directors of Yahoo, Starboard Value announced that it has acquired a significant ownership stake in the beleaguered, and once-relevant, Internet portal.  Starboard outlined a case for Yahoo to monetize the company’s non-core minority equity investments (Alibaba, Yahoo Japan) in a tax-efficient manner and tie-up with AOL, which itself has been on the … Read more

What Is Fat Pitch Investing?

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“I call investing the greatest business in the world … because you never have to swing. You stand at the plate, the pitcher throws you General Motors at 47! U.S. Steel at 39! and nobody calls a strike on you. There’s no penalty except opportunity lost. All day you wait for the pitch you like; then when the fielders are asleep, you step up and hit it.” —Warren Buffett, Interview in Forbes magazine (1 November 1974) “The stock market is a no-called-strike game. You don’t have to swing at everything — you can wait for your pitch. The problem when you’re a money manager is that your fans keep yelling, ‘Swing, you bum!’” –Warren Buffett, 1999 Berkshire Hathaway Annual Meeting, … Read more

Performance Update: The Valuentum Buying Index

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Note: A more recent analysis of the Valuentum Buying Index rating system can be accessed at the following link: /Value_and_Momentum_Within_Stocks_Too A version of this article was published October 26, 2013. By Brian Nelson, CFA We periodically update the performance results of the Valuentum Buying Index (VBI), the stock-selection methodology that drives idea-generation within the Best Ideas portfolio. The academic studies of the Valuentum Buying Index can be accessed here (white paper) and here (AAII). The latest iteration of the performance, dated September 3, 2014, continues to showcase the strong sorting mechanism embedded within the investing framework, particularly when the index is coupled with qualitative oversight and portfolio management skill. Sorting winners from losers is what the Valuentum Buying Index has been designed to … Read more

Google’s Net Cash Position Grows to $56 Billion

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Google (GOOG, GOOGL) is trading just shy of a market capitalization of $387 billion at the time of this writing, one of the largest US-traded stocks out there. For a company this big to grow revenue 22% in its second quarter, which it reported Thursday, is quite the feat. The firm’s non-GAAP operating income came in at $5.14 billion, showcasing a 32% margin, up from $4.21 billion, matching the pace of growth on the top line. Non-GAAP earnings-per-share in the second quarter of 2014 was $6.08, compared to $4.96 in the second quarter of 2013, representing year-over-year growth just slightly higher than the 22% mark. Google is simply executing fantastically, and we continue to like shares in the Best Ideas … Read more