GOOG

Google Shows Why Patience and Perspective Are Important

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By Brian Nelson, CFA The equity markets are an interesting beast. In October 2012, we pounded the table on adding Google (GOOG) to the Best Ideas portfolio (see email transaction alert archive here), which followed the September 2012 edition of the Best Ideas Newsletter, where we highlighted the company as the latest example of the power of the Valuentum Buying Index (see edition here), our stock-selection methodology. Part of the reason why I wanted to bring this up is not to pat ourselves on the back, but instead to reiterate the importance of ‘patience’ and ‘perspective’ in investing, regardless of the process you pursue. Let’s look at the following chart of Google from the date of the release of the … Read more

Sign of the Times: Facebook Soars, Yahoo Sours

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On January 29, Facebook (FB) kept the fundamental momentum going in its operations. The social media giant announced impressive fourth-quarter results, revealing that revenue jumped 63% (see image below) thanks to a 76% increase in revenue from advertising. Facebook indicated that mobile advertising revenue now represents more than half of advertising revenue compared to less than 25% in the same period a year ago. Income from operations nearly doubled in the period, to $1.13 billion, as the firm’s GAAP operating margin leapt 11 percentage points, to 44%. GAAP net income advanced to $523 million, compared to $64 million in the fourth quarter of 2012. Diluted earnings per share came in at $0.20 per share in the quarter, up from $0.03 … Read more

Icahn’s In-depth Letter to Apple Still Does Not Remove Time Horizon

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We believe Apple’s (AAPL) shares have valuation upside (see 16 page report), but as we have outlined before here, activist investor Carl Icahn’s proposal to force Apple to buy back stock over a certain time period (“during fiscal 2014”) as opposed to under a certain price (our fair value estimate) is imprudent. We encourage Icahn to further revise his proposal. Additionally, we think Icahn’s valuation process is too simplistic (see footnote 1), and we encourage him to disclose a more rigorous valuation assessment of the firm that takes long-term forecasts into consideration. Said differently, we’d like him to justify why Apple should trade for 16 times earnings on the basis of Apple’s own financials, not merely use the consensus market multiple for justification. … Read more

Apple and Facebook Lead the Charge on Monday

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On Monday, official news of an Apple (AAPL)-China Mobile (CHL) iPhone deal sent shares of Apple soaring. We had highlighted initial reports of the announcement December 5, and we fully expect the new business to be a strong fundamental catalyst for the iPhone maker. China Mobile is the largest mobile operator in China by users, and even a low-single-digit conversion rate to the iPhone will move the deal at Best Ideas portfolio holding Apple. The iPhone 5s and iPhone 5c will be available in China Mobile and Apple stores across mainland China beginning January 17, 2014. We think consensus estimates for Apple’s earnings through the middle part of this decade are too low (on the basis of this transaction), and … Read more

Has the Time for Robots Finally Arrived?

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The 1980s were filled with ideas that robots would take over our personal lives. There was, of course, The Terminator, which ingrained a sense of fear within society about the potential dangers of advanced robotic use. But there were other “friendlier” movies, too. Who could forget the beloved ‘Johnny 5’ in Short Circuit or Paulie’s robot “girlfriend” in the fourth installment of the Rocky series? Unlike depicting a robotic assassin from a post-apocalyptic future, these movies showed the humanization of robots with feelings like fear and love. Are we now re-living a bout of 1980s nostalgia, with Amazon (AMZN) and UPS (UPS) recently talking about unmanned flying drones delivering packages to consumers’ door steps? It’s probably not too far of … Read more

Great Early Holiday Sales Read for Best Ideas Portfolio Holdings

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On Saturday, IBM Digital Analytics Benchmark, a source for real-time cloud-based online retail data and analysis, revealed strong online retail trends for this Thanksgiving and Black Friday: US Holiday shoppers once again shopped online early for the best deals with Thanksgiving Day online sales increasing by 19.7 percent over 2012. This momentum set the stage for a record Black Friday, with online sales growing 18.9 percent over the same period last year. The biggest surge came from mobile sales increasing to 25.8 percent of total online sales for Thanksgiving and 21.8 percent for Black Friday as consumers went from the dinner table to their tablets to lock in the best offers. In addition, IBM reported that New York City consumers … Read more

Best Ideas Portfolio Alert: Google Up Huge After-hours!

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“How poor are they that have not patience!” – William Shakespeare, Othello Dear Member: If you’ve been following firms that have recently scored a 10 on the Valuentum Buying Index, and by extension, monitoring the holdings of our Best Ideas portfolio, Google’s (GOOG) performance after-hours today is quite exciting. We like to use Google as an example of how we use our Valuentum Buying Index ratings in our portfolio management process. A read through our ‘FAQ on the topic’ hits on a number of important points we try to convey, but the Google example is perhaps the best one for a couple reasons. First, we received a number of membership cancelations to our service in October/November 2012 (last year) citing … Read more

Get To Know Yahoo!’s Management; We Value Alibaba at $75 Billion

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The only question that comes to mind after looking at the below slide is: What turnaround? Image Source: Yahoo GAAP revenue down 5%. Revenue ex-TAC down 1%. Adjusted EBITDA down 19%. Income from operations down 39%. Non-GAAP operating income down 27%. Net earnings down 91%. EPS attributable to Yahoo down 89%. Non-GAAP EPS down 13%. Free cash flow down 73%. Cash and marketable securities down 66%. It’s flat-out puzzling that CEO Marissa Mayer included the following statement in the third-quarter press release: “I’m very pleased with our execution, especially as we’ve continued to invest in and strengthen our core business.” We understand the importance of staying positive, but her statement is quite a stretch considering actual financial performance at the core Yahoo business.  The only line item in … Read more

Ads Are (Finally) Coming to Instagram

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Facebook-owned (click ticker for report: ) picture and video sharing social network Instagram announced Thursday that it will begin displaying ad content. Although several brands are already active on the network, this will be the first time that companies will pay to reach Instagram’s 150 million users. Since Facebook paid $1 billion for the company back in April 2012, we think advertising was an inevitable development. Some users will be upset about Instagram introducing ads (the image below is taken from the announcement page), but users also predicted the demise of Facebook and Twitter advertising. Source: Instagram Yet, the popularity of Facebook and Twitter has remained resilient. As long as Instagram delivers relevant content in a reasonable amount, we doubt … Read more

Take the Money and Run: Fairfax Bails Out Blackberry

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Late last week, smartphone maker Blackberry (click ticker for report: ) preannounced terrible second quarter results. Revenue likely declined approximately 43% year-over-year to $1.6 billion, which is nowhere in the ballpark of consensus estimates in the $3 billion range. This amounted to 3.7 million phone sales, far less than the number of units Apple (click ticker for report: ) sold during the first weekend of its iPhone 5S/5c release. The firm will post an operating loss of $950 million to $995 million driven primarily by a pre-tax inventory charge of $930 million to $960 million. Cash fell to $2.6 billion, and the firm announced that it would lay off 40% of its global staff, leaving the company with 7,000 total … Read more