Tuesday, September 11, 2007

Does MOT have a moat ?

I bought MOT on a momentum, earnings were good, good news of an Ipod phone were inundating the TV stations and newspapers, Ed Zander was the Man.

The thing is, the RokR is a bit of a disappointement, what the RazR did a few months ago, the RokR almost undo in just a few week. The RazR was slick and designish, the RockR is bulky and not up to the latest trend (flip phones, trend which has partly been initiated by Motorola themselves).

But worst of all, the RockR is a lameduck music player, transfet rates between your PC and the phone are 20x slower than the Ipod, (by the way, who got the idea to launch it the very same day as the nano???) the storage of 100 songs is less than what early adopters (the target audience) had 5 years ago on their mp3 players, you can't even download songs directly from your phone, and let's face it Nokia, Samsumg et al won't take too long to market better products...

So, MOT Buy, hold, Sell.... I'm going to hold because dividends and future RazR-like model should bring the stock up, along with news from third world country (where Motorola is about to roll out cheap handset to built brand awareness and gain public markets). But if you are like I was a few months ago, wondering whether to buy or not, I would say one thing:

Despite first impression MOT doesn't have a deep moat around its castle

Value vs Growth

Of course this is not really a value vs growth post, both are two great investment philosophy and depending on what you look at (and for) both work very well (if you're into day trading or short term you might want to stay away from value though)

Nope, this is still my thoughts about what I should do with my extra cash siting on the cash account...

I explored the growth part last post (TINY, EXEL, TASR...) and today I was thinking about value plays that could prove better investment

The market has been bad, even nasty in the recent week (at least for me, my portfolio shrunk from +14% to +3.75%) and some stocks have taken a serious beating since the summer, here are my favorites :

* MRK : yes, still watching it, I suspect it could drop a bit more on one last bad news so I'll wait on that, pays dividends
* FNM : Fannie May is on its way to pull a Tyco... what does Tyco stocks sell for today... (like...a good price, to be vague)
* LXK : I don't know how they came up with such numbers, but I don't know why the market overreacted so badly either (easy 20% here...I think)
* MCD : About to IPO the Chipotle chain, pays dividends
* MSFT : yes, Microsoft, Fortune has a great article arguing that MSFT is undervalued, I am a frim believer of that

I'm still pondering which one to buy though...

Long-Term Thinking in a Short-Term World - A Motley Fool Article

Long-Term Thinking in a Short-Term World


By Jim Gillies10/20/2005

"WAKE UP! They are all about you; all around you!" --

Street Preacher, John Carpenter's They Live

In John Carpenter's 1988 cult classic They Live, society has been subliminally subverted by profit-minded aliens bent on fostering a culture of conspicuous consumption. Stimulation to mindlessly consume is hidden on every billboard, every magazine cover, every television program, and even on the dollar bill.
Perhaps I'm being paranoid, but I see parallels with the investing world, and, unlike the movie, there's nothing subliminal about it. In fact, it's bloody near everywhere.
Just breathe Look at the overwhelming and increasingly short-term focus of our investing world. It's there in multiple 24-hour business television channels. It's present in Jim Cramer and his "Lightning Round." It exists on the Fool message boards, or the much maligned (often with good reason) Yahoo!(Nasdaq: YHOO) boards. Heck, it's implicit in every quote service disclaimer: "Quotes delayed 20 minutes." Can someone explain to me why we should care about 20-minute delayed quotes? What investment-thesis-altering event are we going to miss in that delay?

In the introduction to Hewitt Heiserman's excellent book, It's Earnings That Count, Vanguard Group founder John Bogle cites the turnover of the average fund as being 110% in 2002. That's a mean holding time of 11 months. Have the mutual funds with a long-term outlook disappeared?

Ignore the market I live in Canada, where the market index is heavily weighted to high-flying energy stocks. The Toronto Stock Exchange is up nearly 15% year to date, versus a flat S&P 500. Yet, despite this performance, I've had two close family members in the past two days call me to ask, as falling oil prices provoked a 4% market retreat, "What's going on with the market?" Who cares? Seriously, if you'd been told at the beginning of the year that the market would be up 15% after nine months, wouldn't that have been cause for celebration? Yet the focus is on short-term worries.

Look at a company like Garmin(Nasdaq: GRMN), which I've written about in glowing terms before. After going public in December 2000, imagine an investor who bought soon after and only looked at year-end prices:

Date Price One-year return CAGR* S&P 500 one-year return S&P 500 CAGR

Dec. 31, 2000 $19.75 N/A N/A N/A N/A

Dec. 31, 2001 $21.32 7.9% 7.9% (13.0%) (13.0%)
Dec. 31, 2002 $29.30 37.4% 21.8% (23.4%) (18.4%)
Dec. 31, 2003 $54.48 85.9% 40.2% 26.4% (5.6%)
Dec. 31, 2004 $60.84 11.7% 32.5% 9.0% (2.1%)
Oct. 12, 2005* $62.51 2.7% 27.2% (2.8%) (2.4%)

*Compound annual growth rate. **Year to date.

Looking simply at the table above, would our hypothetical investor be satisfied with beating the market by an annualized 30 percentage points? Would she, ex post facto, agonize over the 48% stock price decline in the spring of 2004 or the 36% decline in the spring of 2005?
Sure, Garmin is a sample of one, but carefully analyzing the underlying business of all our potential investments -- and then ignoring short-term worries -- would have spared us ulcers in any number of companies.

The truth is out there Admonitions to listen to and emulate the masters by having a long-term focus are everywhere. Warren Buffett has advised investors to act as if their investing careers were limited to a lifetime decision card with just 20 punches on it, and has expounded that Berkshire Hathaway makes investments in businesses, caring not a whit if the market closed for 10 years. Phil Fisher advocated a philosophy of selling almost never. Peter Lynch has said that most of the good things that happened to the stocks he bought took two or three years to develop. Fool co-founder Tom Gardner has adopted this philosophy in Motley Fool Hidden Gems, urging investors to hold recommendations for at least three to five years.
The masters have the success to back up their methods, and yet every day the collective "we" ignores received wisdom. You can see it every time a message board posting says something along the lines of: "Stock X has gone down 5% today, WHAT'S HAPPENING?" Take a look at the returns of some selected Motley Fool Stock Advisor and Hidden Gems picks:

Company Initial pick date Price on day of pick Returns to date CAGR to date Declines of more than 15% Largest decline

CNS(Nasdaq: CNXS) Aug. 28, 2003 $11.18 106.9% 40.8% 2 (35%)
Electronic Arts(Nasdaq: ERTS) April 12, 2002 $29.95 71.8% 16.7% 5 (34%)
Pixar(Nasdaq: PIXR) March 7, 2003 $26.56 81.9% 25.8% 2 (24%)

Those are outstanding returns, to be sure. Yet, a visit to their respective message boards will find posts just like the one above, even with the rising share prices. The messages around us suggest that the masters' words are too often falling on deaf ears.

The Foolish bottom line A professor friend of mine laughed at the behavior of the financial set, particularly with respect to the technology bubble and subsequent bursting. To paraphrase, he said that an entire industry forgot its root principles in its quest to justify ever-higher stock prices, making up new metrics when the old ones didn't give the desired answers. In one sense, he's right; ever-crazier justifications were put forth. But in another sense, he's wrong. Those preaching that valuation mattered -- that Cisco(Nasdaq: CSCO) at 184 times earnings was illogical and that stock ownership was business ownership -- never ceased their message. We just stopped listening.

*** Copyright The Motley Fool www.fool.com ***

This article is in the spirit of the book -the number- that I recommended few weeks ago. This is an article to think about.

I myself fell into the short term trap with my stupid sale of URBN, so I just hope that one day investors will realize how stupid that is to look a intraday graph when you should buy a company for its long term opportunities instead of short term stock movements.

Earning Season

Today two of my holdings are reporting, ERTS and MOT.

While I do not like to focus on earnings (The book -the number- is a really good explanation why) since I'm a long run guy, I have to admit that as a daily market-watcher I'd love to see my favored companies post nice numbers.

I am hoping for disapointing numbers from some value giants (MSFT or WMT or MRK) to jump on the BUY occasion. Or more likely from some long shot growth stocks like TASR , EXEL or TINY, to eventually invest that 10% of my account held in cash (since the worst move ever, aka the sale of URBN for $25)

Let's wait for the one digit, two decimals number to do its magic and drive the market crazy tonight

The investor's dilemma

I have $1,500 to invest, eventually, one day I will buy TINY and TASR. These two things are for sure.

However I do believe that (1) TASR is not done drowning and (2) TINY is not anywhere close to the day it'll rise.

Should I invest into something else, and then when cows are falling from the sky sell and reinvest (hopefully with some extra greens made in the time span) in TINY and/or TASR? Or should I just wait (since nothing looks too attractive to me right now for a mid term holding) and keep the cash in the piggy?

I've been thinking about it for weeks now, my potential value plays (WMT, FNM, MSFT etc.) are probably the worst place to invest if the objective is to withdraw in a few months and I don't see much other opportunity that I like, understand and am confident with.

... So I guess buying time will be postponed for some more time, until I make up my mind

Bought BOT today

Bought BOT @ 114.51

Out of the blue I bought BOT, the Chicago Board of Trade this morning. It went public a few days ago and like CBOU before I totally missed the news of the IPO (Note: I'm glad I missed CBOU, not that I would have bought it, but I grew curious of it in spite of the fact that it's quite a worthless stock, IMHO).

Now as a Chicagoan I may have faith in the CBOT a little too much, but the CME Chicago Mercantile Exchange that went public 3 years ago has been doint tremendously good (+800%), the Nasdaq (NDAQ) is on the rise too, so I briefly pondered, gathered some crucial informations (there are pros and cons that I'm about to list) and hit the "place order" button on my broker's website.

Now is that a value play, a growth play, something else?

As far as I can see it, I would call it a good valugrowth play, trading is on the rise (who doesn't have at least an IRA or 401k in today's world) and will probably be for a while, as younger generation are more familiar with it (and as costs of trading goes down). Warren Buffet explains he bought G (Gilette) because the population is increasing, therefore there will be more people to shave. I think there will be more traders in the future, I think individual investors will grow interested in options (what the CBOT mostly trades, along with futures) therefore I think BOT will rise in the long run and prosper.

For those who don't know, the CBOT is on of the last place on earth where brokers are still gesticulating to place their orders, making it somewhat of a museum, but especially giving it some room to improve whenever it flips to the electronic marketplace type of organization. This I believe will be a big pro for the stock. The Con is mostly that trading prices are decreasing every other day, making it harder to squeeze out extra fees.

Anyway, this is where I eventually put my free cash, I am convinced this is a good quite safe place to put it, and if anything happens, I'll at least have a place to seek revenge two blocks away from my office.

Uncle Warren likes his Coca Cola

There's at least one live person in the investing world that every single investors, even the arrogant edge fund managers do respect. No, that person is not Jim Cramer (on the cover of BusinessWeek recently, on TV and radio every day), that person is obviously Warren Buffet.

Therefore, and because I don't have that many things to mumble about today, I would like to disclose BRK.A holdings and rant about them, the list comes this way from Morningstar.com

Coca-Cola KO: Wide Moat, 5 Stars
American Express AXP: Wide Moat, 3 Stars
Procter & Gamble PG: Wide Moat, 3 Stars
Wells Fargo WFC: Wide Moat, 5 Stars
Moody's MCO: Wide Moat, 3 Stars
Wesco Financial WSC: Narrow Moat, 5 Stars
Washington Post WPO: Wide Moat, 5 Stars
M&T Bank MTB: Narrow Moat, 3 Stars
Shaw Communications SJR: Not Rated
American Standard ASD: Narrow Moat, 3 Stars
First Data FDC: Wide Moat, 4 Stars
Gap GPS: Narrow Moat, 5 Stars
Comcast CMCSA: Wide Moat, 4 Stars
USG Corporation USG: Not Rated
Gannett GCI: Narrow Moat, 5 Stars
Costco COST: Narrow Moat, 3 Stars
SunTrust Bank STI: Narrow Moat, 3 Stars
Nike NKE: Narrow Moat, 3 Stars
Iron Mountain IRM: Wide Moat, 3 Stars
Tyco International TYC: Narrow Moat, 4 Stars
Pier 1 Imports PIR: No Moat, 5 Stars
Outback Steakhouse OSI: No Moat, 5 Stars
ServiceMaster SVM: Narrow Moat, 2 Stars
Lexmark International LXK: Narrow Moat, 5 Stars
Sealed Air SEE: Narrow Moat, 5 Stars
PetroChina PTR: Narrow Moat, 1 Star
Home Depot HD: Wide Moat, 4 Stars
Mueller Industries MLI: Not Rated
Comdisco Holding CDCO: Not Rated
Lowe's Companies LOW: Wide Moat, 3 Stars
Dean Foods DF: Narrow Moat, 3 Stars
Anheuser-Busch BUD: Wide Moat, 5 Stars
Kingfisher KGFHY: Not Rated

Not very high tech and fancy, but it works wonders (I by the way own IRM).

I have to say I am skeptical about a couple of those (PIR especially) but who am I.

What always amazes me is how betting on those household names companies, Buffet managed to produce such results. You would not expect such a blue chip portofolio to behave the way it did, but once again, the man has nothing to prove anymore.

Finding a hidden gem is one thing, finding a whole portfolio of big names that rises faster than the much hyped trendy stock is another one.

Haliburton files for KBR IPO


I've been abnormally quiet these days on this blog because of my workload and my travel log getting clogged.

But this week-end I read an article in the WSJ that I think is worth mentioning, if you haven't read it yet.

HAL filed for a $500 mil IPO of its KBR unit, you probably all know that already. But the point of the author was to stress that besides the fact that KBR will likely be a hot IPO, it will free HAL from its diversified image.

Investors have preferred pure plays like Schlumberger in the past because of the complexity of HAL, making it trade at a lower multiple compared to its more focused peers.

Just like an introduction to an index (GOOG in the S&P 500 recently), becoming a pure play draws massive amounts of cash to your stock via the institutionnal investors looking to diversify.

Another point made by the author was that people associate KBR and HAL with military contract, but in reality it amounts to only a slight percentage of the companies income (although a bigger chunk of revenue, which means that a decline in military contract will improve the margins number) therefore the company isn't at the mercy of wars and conflicts, but rather merely uses them to generate some extra income.

That being said, I look for HAL to go past the par level at $100. I'll do some more research on HAL and will post further info when possible

Bought MOT @ 22.31


I snatched 25 more shares of MOT
today to increase my position to 100 shares.

Earnings have been really good for MOT
and yet the stock sold off on lowering margins on the Razr and in emerging markets, bottoming at more than 7% below yesterday's close.

My new average cost is now 21.17, so I'm still sitting on a profit today and hope to benefit to a return to common sense as early as tomorrow. I'll also concede that I've pushed my stakes to 100 shares so as to collect more revenues through dividends and covered calls.

I've been in and out of love with MOT
and still don't really know what to expect, but I have faith in Ed Zander and with dividends, margin of safety thanks to my average cost and covered calls this is not a risky play and should pay for itself in no time.

Bought HAL @ $83.67


I jumped on the HAL bandwagon today, with the stock gently rising since the announce of the KBR IPO.
Promoted by Cramer and touted by all parts, HAL should reach $100 within a couple of months if not weeks.

I've detailled a bit more what I like about the IPO and why I think HAL will benefit from it as a stock (as a company there are also some pluses but they're not worthy of a $20 rise by themselves.

I admit I haven't gotten a chance to do much research on HAL and bought mostly on a gut feeling and on the hype. We'll see where that takes me.

The stock might be a little over extended but once again, this is a buy on the news and fundamentals and technicals have little to do with this trade.

Trapped by my covered call on AKAM


A while ago, when AKAM was in the low 20's, I sold a covered call on my stocks at a strike price of $30, way out the money and for a measly .90

Then one day AKAM popped above $32 from something like $28 within 5 minutes and never went back.

Now I can assume that comes August, somebody is going to pick up my shares for $30 (nice profit for me, but nowhere near what I'd make without that call). If I want to buy back the call, it would now cost me around 5.60.

I've been sitting on that decision for too long and everyday it seems like AKAM rises higher.

I cannot wait any longer and will take action either today of tomorrow. What action? I don't know yet, but I'll do something.

New ATEX regulations to benefit motors and industrials electric equipment manufacturers (ABB)


New regulations imposing ATEX certification are being imposed this summer on vast segments of the industrial process. That means new orders and/or maintenance for industrial suppliers.

This is the type of news that doesn't make the headlines, but for following the sector for work, I guarantee you that companies like ABB (which I own calls on), SPX, Illinois Tool Works ITW
, Stanley, GE
(althought this is not significant for GE because of their size), Siemens SI, etc...

Watch out for one or two good quarter by these glamourless stocks

My first short sell ever...no shares available (TZOO)

Travelzoo ran up 160% in 5 days, after having lingered around $20 for a couple of weeks. I wanted to short the stock (my first time ever) but my order wasn't filled as there aren't any shares to borrow...

I guess I'll wait for another time to do my first short selling, potential targets :
GM which I believe will file for chapter 11 sooner than later
OSTK I can't believe this website still has traffic, neither can Mark Cuban
AAPL I'm just waiting for the Ipod killer to hit the market (whatever that think will be)

Palomar Medical (PMTI)

PMTI reported better than expected earning this morning and the stock is up 9% on the news.

I've been holding some Palomar Medical PMTI for a little over 4 months and was deep in the red for the most part because of bad news on rivals such as CUTR. But I've always kept a positive expectation of PMTI, especially as we come closer to the mass marketization of their hair removal product with Gilette G, and their other deals with JNJ

In a Peter Lynchian way, you don't even need to look at the numbers to see potential in PMTI, just imagine how huge the market is going to be for hair/tatto/skin treatment in this coming age of ageing hip population. And PMTI is poised to score big on that trend, with a toughness in court where the company fought its way through competitors stealing technology, and with partners like Gilette and Jonhson and Johnson, PMTI has the opportunity to leave the dermatologists offices and sit on Target TGT or Wal Mart's shelves.

I almost bought some more shares when I was 20 percentage points below my average cost, but didn't. Today I'm back in the green zone with 3% and would recommend PMTI to any patient investor willing to wait just a year or two for serious dough

Saturday, September 1, 2007

Indian Play (TTM)

Tata Motors (TTM) ADR

According to everybody at the watercoolers around the globe, China is the next superpower. According to me, India is the real deal. Inheriting of some anglosaxon traits due to its past colony status, fluent in english for the most part, growing as fast as China, and most important of all, less regulated than China.

I have trouble thinking that a country that forbids Yahoo and Google to display certain websites, that has people in the far lands dying of hunger while Beijing hosts the Olympics, that is basing its rise on manufacturing rather than services, can be a world leader of some sort.

India on the other hand is certainly not as glamourous, but I expect it to emerge as the real leader of teh far east. Their Focus is on services rather than manufacturing, which places them closer to the 21st century than 19th century style chinese manufacturing.

One indian stock I like is TTM, Tata could be poised to become a dominant force if the big3 and the japanese leave the indian market alone too long, or fail to seduce local customers.
ETFs could be a good andsafest way to play on India, but for some reason I'm still buying individual stocks only. Results achieved by some fellow bloggers with some funds could eventually lead me to consider some of them.