Merrill came out with a report this week that reiterated their view that the rest of the world is "decoupling" from the US -- meaning the US is no longer the growth engine of the world economy. Merrill believes that US economic growth will be less than consensus but that the rest of the world including Asia will be faster than consensus. They also argue that valuations in Asia do not reflect this -- investors in Asia appear to assume growth will slow as growth in the US slows.
Since my portfolio is 24% Asia, I view this report favorably. My Asian manager -- Matthews Asian funds is specifically targeting companies that benefit from the growth in the domestic economy and from intra-Asia trade rather than the traditional exporters to the US. They have a great long term track record built mostly by not going down when the markets falter. They get close enough on the upside and make up for it by huge outperformance when the markets are falling.
Thursday, August 9, 2007
Techne (TECH)
Techne is a small cap stock that very few have ever heard of but it’s a wonderful business. They sell purified proteins and other biotech material for research labs both academic and biotech/pharmaceutical based. This is completely a consumable business so there is no expensive equipment to sell and therefore no capital budget concerns.
Given the importance of quality materials in multi-million dollar studies, quality is more important than price in this business. The other wonderful part of this business is that once Techne develops a product – and they have over 10,000 products – they can keep selling it for years to come. The business has high operating leverage – meaning high fixed costs so that incremental revenues do not require proportionate increases in costs. That’s how you get high 50’s operating margins. They have little need for capital expenditures either so the free cash flow is strong and their management of capital is exceptional – that leads to high returns on assets despite not using any debt.
The business grows in the 8-12% range consistently – even during the bubble burst of 2000-2002 when pharma stopped spending on most life sciences equipment, they still spent more each year with Techne. The one drawback is the valuation – its not cheap but you get quality for your money. This is one of my plays on the growth in biotech or the growth in genomics – DNA type stuff. Its also a consistent grower for me – a lower beta name that serves as a port in the storm when the market is falling.
They reported this week and the numbers were strong -- revenues up 12% and EPS up 18%. strong cash flow too. stock popped a few dollars on the news. check out the website --
http://www.techne-corp.com -- not very flashy but functional. The management team is focused, disciplined and outstanding.
I view this one similar to GGG -- its a wonderful business that over the long term can make you wealthy but over shorter time frames might not move much.
Given the importance of quality materials in multi-million dollar studies, quality is more important than price in this business. The other wonderful part of this business is that once Techne develops a product – and they have over 10,000 products – they can keep selling it for years to come. The business has high operating leverage – meaning high fixed costs so that incremental revenues do not require proportionate increases in costs. That’s how you get high 50’s operating margins. They have little need for capital expenditures either so the free cash flow is strong and their management of capital is exceptional – that leads to high returns on assets despite not using any debt.
The business grows in the 8-12% range consistently – even during the bubble burst of 2000-2002 when pharma stopped spending on most life sciences equipment, they still spent more each year with Techne. The one drawback is the valuation – its not cheap but you get quality for your money. This is one of my plays on the growth in biotech or the growth in genomics – DNA type stuff. Its also a consistent grower for me – a lower beta name that serves as a port in the storm when the market is falling.
They reported this week and the numbers were strong -- revenues up 12% and EPS up 18%. strong cash flow too. stock popped a few dollars on the news. check out the website --
http://www.techne-corp.com -- not very flashy but functional. The management team is focused, disciplined and outstanding.
I view this one similar to GGG -- its a wonderful business that over the long term can make you wealthy but over shorter time frames might not move much.
Monday, August 6, 2007
Diversification -- how you are doing in the decline depends on it
At the low this morning was your portfolio down more than the 8% the S&P was down from its high? Then most likely you own some portion of financial stocks -- banks, brokers or mortgage REITs, high yield bonds or some other vehicle that is high yield oriented (business development companies, MLPs, etc.) or small cap stocks.
These are the worst performing areas so the more exposed you are to them the more you think the decline has been bad. If you own a lot of health care stocks or consumer staples like PEP, then your portfolio has done very well and you can't understand what all the fuss is about.
TECH, LH, MDT, ILMN, NVT, CME, etc. these are all up or flat since the market peaked. AB is another one that is only a couple of dollars from where it was in mid July.
If all of my portfolio was in DFR or BSC or something similar, then this decline would be much worse than it has been for me. Having a heavy exposure to smaller cap stocks has not helped -- especially with one that had a rough reaction to earnings (TSRA) but the list of stocks above that are up or flat during the decline is an offsetting factor. Diversification is key and its not just about owning different sectors as it is owning stocks with different drivers -- i.e. don't have all your money in stocks driven by the private equity boom or the mortgage boom or the debt boom, etc.
When I wrote a several posts ago about losing permanent capital, what did I mean? If you owned shares of SUNW, JDSU, EMC, NT, etc. during 2000 and did not sell until sometime later then you lost permanent capital. Some of those stocks are STILL down 90% from their highs several years later. They aren't coming back. American Home Mortgage is not coming back -- neither is Novastar or many other financials -- perhaps even BSC or even my own DFR. Yet during 2000 there were plenty of stocks that were bottoming and actually took off over the next several years -- they were non-tech stocks and include everything from MO at $20 to Exelon at $20 to many others. They have outperformed the market dramatically over the last 7 years.
There are financial stocks today that will lead to loss of permanent capital and there are non-financial stocks that will be big winners in the future. The key is finding those stocks where the future prospects of the business are materially better -- not just a little but a huge gap -- from what is embedded in their current prices. This is what I will continue to try to do.
BTW, the bond market is working the same way -- the problems are in sub prime, Alt-A and the debt that is private equity related or is part of a package of loans that is called a collateralized debt obligation. The CDO's aren't very liquid in the best of times but now its obviously worse. The more exposure to those areas and the more leveraged you are, the harder this market is for you.
These are the worst performing areas so the more exposed you are to them the more you think the decline has been bad. If you own a lot of health care stocks or consumer staples like PEP, then your portfolio has done very well and you can't understand what all the fuss is about.
TECH, LH, MDT, ILMN, NVT, CME, etc. these are all up or flat since the market peaked. AB is another one that is only a couple of dollars from where it was in mid July.
If all of my portfolio was in DFR or BSC or something similar, then this decline would be much worse than it has been for me. Having a heavy exposure to smaller cap stocks has not helped -- especially with one that had a rough reaction to earnings (TSRA) but the list of stocks above that are up or flat during the decline is an offsetting factor. Diversification is key and its not just about owning different sectors as it is owning stocks with different drivers -- i.e. don't have all your money in stocks driven by the private equity boom or the mortgage boom or the debt boom, etc.
When I wrote a several posts ago about losing permanent capital, what did I mean? If you owned shares of SUNW, JDSU, EMC, NT, etc. during 2000 and did not sell until sometime later then you lost permanent capital. Some of those stocks are STILL down 90% from their highs several years later. They aren't coming back. American Home Mortgage is not coming back -- neither is Novastar or many other financials -- perhaps even BSC or even my own DFR. Yet during 2000 there were plenty of stocks that were bottoming and actually took off over the next several years -- they were non-tech stocks and include everything from MO at $20 to Exelon at $20 to many others. They have outperformed the market dramatically over the last 7 years.
There are financial stocks today that will lead to loss of permanent capital and there are non-financial stocks that will be big winners in the future. The key is finding those stocks where the future prospects of the business are materially better -- not just a little but a huge gap -- from what is embedded in their current prices. This is what I will continue to try to do.
BTW, the bond market is working the same way -- the problems are in sub prime, Alt-A and the debt that is private equity related or is part of a package of loans that is called a collateralized debt obligation. The CDO's aren't very liquid in the best of times but now its obviously worse. The more exposure to those areas and the more leveraged you are, the harder this market is for you.
NVT
Navteq had a great quarter and the stock has taken off too -- from the $38 I paid for it just a couple of months ago, to the $65 level of now. The valuation has expanded but its not too egregious -- especially if further upside is likely. If you haven't taken some profits yet, I would suggest it. The owners have changed to some extent -- more momentum oriented -- that will sell at the first sign of a slowdown.
I think GPS/location based services have a great growth potential but its hard to predict any individual quarterly numbers. Navteq is one step removed from the customer -- they sell to portable device OEMs like Garmin or to in dash suppliers like BMW so its even harder for them to predict demand -- they are not in touch with end users. The business is changing -- adding features like traffic, points of interest, etc. while also adding platforms -- started in dash in autos then portable devices and now smartphones too. Managing all this change is not easy -- lots of moving parts that Navteq has only limited control over.
Navteq mentioned various growth drivers on the call and said 2008 is when they will be ready or have a more material impact. That is what concerns me -- can they maintain the momentum when a lot of their future growth drivers are 2008 events. Luckily we are heading into the seasonally strong period for consumer technology products. They also mentioned that retailers are planning on adding shelf space to GPS models -- that should help unit growth maintain its momentum.
Longer term the growth drivers are there -- can't believe that location based content won't continue to become more valuable especially as we move to the iPhone paradigm of carrying around full functioning Internet enabled computers in our pockets. That doesn't mean the ride is straight up -- look at all the notes on seekingalpha.com now about NVT -- where were all these people 2 months ago when the stock was a bargain and growth was a question mark? all that changed was the momentum -- do you think it can't change back? Just advising to take advantage of the volatility -- if you trim now, then you can buy more on a pullback because they only grew portable units 100% instead of 200% or whatever the excuse is for slowing mo.
If the stock keeps rising before the next EPS report, I will be more inclined to reduce the position some -- momentum investors are wonderful on the way up but not as much fun on the way down!
I think GPS/location based services have a great growth potential but its hard to predict any individual quarterly numbers. Navteq is one step removed from the customer -- they sell to portable device OEMs like Garmin or to in dash suppliers like BMW so its even harder for them to predict demand -- they are not in touch with end users. The business is changing -- adding features like traffic, points of interest, etc. while also adding platforms -- started in dash in autos then portable devices and now smartphones too. Managing all this change is not easy -- lots of moving parts that Navteq has only limited control over.
Navteq mentioned various growth drivers on the call and said 2008 is when they will be ready or have a more material impact. That is what concerns me -- can they maintain the momentum when a lot of their future growth drivers are 2008 events. Luckily we are heading into the seasonally strong period for consumer technology products. They also mentioned that retailers are planning on adding shelf space to GPS models -- that should help unit growth maintain its momentum.
Longer term the growth drivers are there -- can't believe that location based content won't continue to become more valuable especially as we move to the iPhone paradigm of carrying around full functioning Internet enabled computers in our pockets. That doesn't mean the ride is straight up -- look at all the notes on seekingalpha.com now about NVT -- where were all these people 2 months ago when the stock was a bargain and growth was a question mark? all that changed was the momentum -- do you think it can't change back? Just advising to take advantage of the volatility -- if you trim now, then you can buy more on a pullback because they only grew portable units 100% instead of 200% or whatever the excuse is for slowing mo.
If the stock keeps rising before the next EPS report, I will be more inclined to reduce the position some -- momentum investors are wonderful on the way up but not as much fun on the way down!
1998? 1990? 1987? 1929? What is the right analogy
1998: financial stocks drop by more than half during the summer/fall of 1998 thanks to panic about the solvency of various brokers due to Long Term Capital Management's high leverage bets combined with Russian debt defaults and the Asian crisis. The Fed cut rates 3 times and stocks rebounded to record levels within a few months. If this is the right analogy, then you would expect a sharp snapback rally in the financials.
1990: Tax reform in 1986 took away certain real estate provisions that hurt the value of real estate as an investment. Falling values hurts collateral and when combined with poor savings and loan investments in high yield bonds, a lot of banks got wiped out -- Bank of New England being the most prominent at the time. Much of our banking system was technically insolvent just like the Japanese banks would become (or just like much of the hedge funds and other investment partnerships including potentially mortgage REITs are today) but we realized our losses and moved on unlike the Japanese who ignored them for years. Losses are a healthy part of the system -- they cleanse markets of investors who take too much risk or speculate too much. Lots of talk aboout Bear Stearns given their conference call on Friday -- if its 1990, then expect this firm to either go under or come close. Surviving firms will be great investments but there is lots of pain to get to the levels reached in 1990.
1987: Bond yields were rising all year at the same time that stock prices were rising too. By August the market peaked at 2728 (or thereabouts) or 22X earnings, while bond yields were near 10%. Why take the risk of the market, when risk free Treasuries are offering 10% guaranteed. Rates are near 5% and falling now on the flight to quality. Stock valuations are much better too. Unlikely.
1929: This period has been studied quite a bit but there are lots of myths or misunderstandings about what happened. Various factors conspired to create a debt financed boom that ended and was made worse by various policy mistakes. The Fed cut rates in the early 20's because Britain wanted to maintain the Pound at a 5 dollars/pound rate -- same as pre=WWI but that didn't make any sense given how much stronger we were post war then Britain. In addition, Mellon (Treasury Secretary) and Coolidge (Pres) engineered tax cuts that boosted after-tax incomes. New technologies such as mass manufacturing techniques plus electricity, radio, appliances, etc. created a huge productivity boom. Stocks were bought on margin -- there was no 50/50 rule like today -- people would margin their stocks up to 90%. The artificially low interest rates led to big growth in debt -- financing purchases of capital equipment, appliances and stocks.
Once the market crashed, the money supply began to shrink, Hoover raised taxes in a futile attempt to reduce the budget deficit, Hoover enacted the smoot-hawley tariffs that started a global trade war -- protectionism rose in most every country reducing the markets for our goods and making foreign goods more expensive. Falling incomes due to rising taxes, reduced trade and reduced liquidity combined with high levels of debt to create a death spiral for too many individuals and businesses. 2001-2003 the President engineered lower tax rates. 2001-2003 Greenspan kept rates lower than ever before -- down to 1% on the Fed Funds. Debt levels in the country have doubled since 2001. We have had a booming economy -- on a global basis and our markets reached new record levels thanks to booming corporate profits (increased productivity thanks to new technologies.) Concerns about our trade deficit have led some to call for protectionism against China. Democrats constantly talk about raising taxes. Don't know for sure but would expect liquidity measures to show declines.
There are the choices -- 1987 seems the most obvious to ignore. I believe we are in a 1998 scenario -- lots of liquidity driven panic but markets will rebound quickly once it passes. 1990 is next and I don't really believe a 1929 scenario is likely simply because there are too many safety nets around now vs. then.
If that is right and 1998 is the right analogy, then the fed will likely provide liquidity at some point to stem the panic and financial stocks will soar back to levels prior to the panic. Of course the question is where are we on the decline -- 2/3 done? 3/4 done or barely half way done with our decline? if we are early in the decline then stocks have a lot further to fall before the fed would take action.
1990: Tax reform in 1986 took away certain real estate provisions that hurt the value of real estate as an investment. Falling values hurts collateral and when combined with poor savings and loan investments in high yield bonds, a lot of banks got wiped out -- Bank of New England being the most prominent at the time. Much of our banking system was technically insolvent just like the Japanese banks would become (or just like much of the hedge funds and other investment partnerships including potentially mortgage REITs are today) but we realized our losses and moved on unlike the Japanese who ignored them for years. Losses are a healthy part of the system -- they cleanse markets of investors who take too much risk or speculate too much. Lots of talk aboout Bear Stearns given their conference call on Friday -- if its 1990, then expect this firm to either go under or come close. Surviving firms will be great investments but there is lots of pain to get to the levels reached in 1990.
1987: Bond yields were rising all year at the same time that stock prices were rising too. By August the market peaked at 2728 (or thereabouts) or 22X earnings, while bond yields were near 10%. Why take the risk of the market, when risk free Treasuries are offering 10% guaranteed. Rates are near 5% and falling now on the flight to quality. Stock valuations are much better too. Unlikely.
1929: This period has been studied quite a bit but there are lots of myths or misunderstandings about what happened. Various factors conspired to create a debt financed boom that ended and was made worse by various policy mistakes. The Fed cut rates in the early 20's because Britain wanted to maintain the Pound at a 5 dollars/pound rate -- same as pre=WWI but that didn't make any sense given how much stronger we were post war then Britain. In addition, Mellon (Treasury Secretary) and Coolidge (Pres) engineered tax cuts that boosted after-tax incomes. New technologies such as mass manufacturing techniques plus electricity, radio, appliances, etc. created a huge productivity boom. Stocks were bought on margin -- there was no 50/50 rule like today -- people would margin their stocks up to 90%. The artificially low interest rates led to big growth in debt -- financing purchases of capital equipment, appliances and stocks.
Once the market crashed, the money supply began to shrink, Hoover raised taxes in a futile attempt to reduce the budget deficit, Hoover enacted the smoot-hawley tariffs that started a global trade war -- protectionism rose in most every country reducing the markets for our goods and making foreign goods more expensive. Falling incomes due to rising taxes, reduced trade and reduced liquidity combined with high levels of debt to create a death spiral for too many individuals and businesses. 2001-2003 the President engineered lower tax rates. 2001-2003 Greenspan kept rates lower than ever before -- down to 1% on the Fed Funds. Debt levels in the country have doubled since 2001. We have had a booming economy -- on a global basis and our markets reached new record levels thanks to booming corporate profits (increased productivity thanks to new technologies.) Concerns about our trade deficit have led some to call for protectionism against China. Democrats constantly talk about raising taxes. Don't know for sure but would expect liquidity measures to show declines.
There are the choices -- 1987 seems the most obvious to ignore. I believe we are in a 1998 scenario -- lots of liquidity driven panic but markets will rebound quickly once it passes. 1990 is next and I don't really believe a 1929 scenario is likely simply because there are too many safety nets around now vs. then.
If that is right and 1998 is the right analogy, then the fed will likely provide liquidity at some point to stem the panic and financial stocks will soar back to levels prior to the panic. Of course the question is where are we on the decline -- 2/3 done? 3/4 done or barely half way done with our decline? if we are early in the decline then stocks have a lot further to fall before the fed would take action.
Friday, August 3, 2007
DFR and the market
The last several days the fixed income market has experienced what can basically be described as an old fashioned run on the bank except in this case its hedge funds, REITs and other financial companies and those screaming for their money back are not individuals but large institutions that have provided the leverage to the system.
Imagine a game of musical chairs where all kinds of fixed income investment portfolios are looking for a seat -- meaning looking for cash or liquidity to satisfy their lenders. Only so much cash to go around right now and meanwhile the collateral -- the so called assets -- the mortgages and other securities are dropping in value due partly to increased credit losses but mostly due to forced selling -- no liquidity. It all starts because some securities have rising credit risks (subprime for one) and that leads to price declines. Many holders of these securities are highly leveraged and as those securities drop in price, the lenders call and ask for more cash -- a margin call. Some have no additional cash to give and they then lose out -- you may have read about American Home Mortgage or the Sowood hedge fund or the Bear Stearns hedge funds.
The risk to Deerfield is that they operate at 12X equity leverage levels -- similar to most banks -- so all it takes is a small drop in the value of assets and they are technically insolvent. Plus they are supposed to be buying their management company in a deal that requires deerfield to borrow $145 million in cash and pay shares of stock once worth $145 million (now worth $100 mill?) I think the stock has dropped because of liquidity fears -- would they be the next total loss -- and because as it drops the risk the deal falls through goes up.
I think the deal goes through because deerfield's manager is under just as much stress in terms of valuation. I think the liquidity issue blows over eventually -- wouldn't surprise me to see another sharp drop -- we are in the eye of the storm now. The reason is that the mortgage portfolio is fairly conservative and the higher yield portions of the portfolio have borrowed money from long term sources that can't do margin calls. I have relied heavily on David Merkel's analysis over at the Aleph Blog (see link on side) -- he does a far better job than I do of explaining their situation.
The liquidity issues for the market will end sometime soon -- its a snowball and eventually it can't get any bigger without one of two things happening -- the Fed cuts rates or injects liquidity or all the vulnerable companies go under and you are left with the strong that can't be taken down. The question is what impact will there be on either other financial stocks (can you say brokers or money managers!) or on the rest of the economy.
My take would be that the impact will not be as great as many now fear -- why? Some have the idea that private equity has been critical to the bull market and that is simply not true -- it hasn't hurt but rising earnings and low interest rates have played a huge part too. Again, the key to my strategy is to focus on company or industry fundamentals and not worry about macro concerns like the so called debt bubble or even worse the trade deficit.
TSRA's earnings or UEPS' earnings or any number of my holdings are impacted indirectly at most by issues in private equity. That statement makes more sense if you view it in the context of outperformance rather than absolute gains. I am not very good at timing the market -- to me there are always great stories to own that can make you wealthy. The key is selection. In the case of DFR, as I said in a previous note, I focused too much on the rewards and not on the potential risks.
My strategy is usually to identify stocks that are running downhill -- ones that have the wind at their back -- that are benefiting from secular trends while avoiding those that are fighting their way uphill. Now cyclical issues are different -- my ownership in AB suffered some hard times in 2001 -2003 but my cost is $35 and the stock even post pull back is still in the low to mid $80's. Not a bad deal. So there is nothing wrong with waiting out the cyclical issues in a stock that is a great business on a secular basis. I'm still optimistic that DFR will work out; but I wish my position size had been smaller to account for the risks when the credit cycle peaks and liquidity evaporates.
Imagine a game of musical chairs where all kinds of fixed income investment portfolios are looking for a seat -- meaning looking for cash or liquidity to satisfy their lenders. Only so much cash to go around right now and meanwhile the collateral -- the so called assets -- the mortgages and other securities are dropping in value due partly to increased credit losses but mostly due to forced selling -- no liquidity. It all starts because some securities have rising credit risks (subprime for one) and that leads to price declines. Many holders of these securities are highly leveraged and as those securities drop in price, the lenders call and ask for more cash -- a margin call. Some have no additional cash to give and they then lose out -- you may have read about American Home Mortgage or the Sowood hedge fund or the Bear Stearns hedge funds.
The risk to Deerfield is that they operate at 12X equity leverage levels -- similar to most banks -- so all it takes is a small drop in the value of assets and they are technically insolvent. Plus they are supposed to be buying their management company in a deal that requires deerfield to borrow $145 million in cash and pay shares of stock once worth $145 million (now worth $100 mill?) I think the stock has dropped because of liquidity fears -- would they be the next total loss -- and because as it drops the risk the deal falls through goes up.
I think the deal goes through because deerfield's manager is under just as much stress in terms of valuation. I think the liquidity issue blows over eventually -- wouldn't surprise me to see another sharp drop -- we are in the eye of the storm now. The reason is that the mortgage portfolio is fairly conservative and the higher yield portions of the portfolio have borrowed money from long term sources that can't do margin calls. I have relied heavily on David Merkel's analysis over at the Aleph Blog (see link on side) -- he does a far better job than I do of explaining their situation.
The liquidity issues for the market will end sometime soon -- its a snowball and eventually it can't get any bigger without one of two things happening -- the Fed cuts rates or injects liquidity or all the vulnerable companies go under and you are left with the strong that can't be taken down. The question is what impact will there be on either other financial stocks (can you say brokers or money managers!) or on the rest of the economy.
My take would be that the impact will not be as great as many now fear -- why? Some have the idea that private equity has been critical to the bull market and that is simply not true -- it hasn't hurt but rising earnings and low interest rates have played a huge part too. Again, the key to my strategy is to focus on company or industry fundamentals and not worry about macro concerns like the so called debt bubble or even worse the trade deficit.
TSRA's earnings or UEPS' earnings or any number of my holdings are impacted indirectly at most by issues in private equity. That statement makes more sense if you view it in the context of outperformance rather than absolute gains. I am not very good at timing the market -- to me there are always great stories to own that can make you wealthy. The key is selection. In the case of DFR, as I said in a previous note, I focused too much on the rewards and not on the potential risks.
My strategy is usually to identify stocks that are running downhill -- ones that have the wind at their back -- that are benefiting from secular trends while avoiding those that are fighting their way uphill. Now cyclical issues are different -- my ownership in AB suffered some hard times in 2001 -2003 but my cost is $35 and the stock even post pull back is still in the low to mid $80's. Not a bad deal. So there is nothing wrong with waiting out the cyclical issues in a stock that is a great business on a secular basis. I'm still optimistic that DFR will work out; but I wish my position size had been smaller to account for the risks when the credit cycle peaks and liquidity evaporates.
update on various issues
I apologize for the lack of posts since last Sunday -- totally driven by the wonderful service I receive from Time Warner cable -- NOT! briefly had access last night and just as I hit the publish button I learn that my access had ended again -- and oh by the way my note was lost!!! UGH!!!
What a week to lose access though!!! The portfolio has had a rough week thanks to the decline in DFR, my Asian funds taking a hit and some of my lower beta holdings getting hurt after doing well for the beginning of the decline (energy related mostly). About 100bps hit so year to date I'm back to only 200bps ahead (roughly up 7% through Thursday).
I will address DFR and the markets in general in a separate note. I also plan to cover TSRA in a separate note. Here I will cover some earnings and thoughts on other stocks.
NVT -- wow. I haven't had the chance to read the transcript from the call yet but obviously it was a good quarter. I did not end up selling any more shares as I had hinted I might on Sunday -- I did some thinking after CIBC upgraded the stock and realized there was more upside than I had thought when I wrote my comments on Sunday -- turned out to be correct. I will offer more comments post my reading of the call -- probably over the weekend.
CME -- volumes up 40% for July is not bad. They also have a tender offer on the table for 11% of outstanding shares for $560 -- the stock should not move too much from that level for this month -- nice support. I am thinking about adding to my position here -- probably trim some asian exposure -- let's face it, does it really matter whether I have 22% or 24% in Asia? either way its a BIG number.
MA -- I'm keeping an eye on Mastercard -- another stock that has gone up a lot but that has what could be a good business -- need to do a lot more reading and thinking but thought I would mention that it is one that I am reading about.
Apple -- got to see an iPhone Wednesday night while at dinner with friends. The owner pulled up this blog while I watched -- very cool. Key thing to think about is that right now its an expensive phone but over time as WiFi service improves, as they add 3G (need better battery life to do so) then you could see people viewing it as a cheap computer rather than a pricey phone. Right now that is a prediction -- high probability that one day it will be reality. Once that happens then look for someone to worry about cannibalization of $1000 MAC laptops for $500-$600 iPhones. Right now I am hoping that GOOG will serve as my play on that trend rather than Apple (Google's stock doesn't seem nearly as risky). One of these days when I'm low on things to write about I will pontificate some on Google -- most people in the media don't get them. To say that Google has problems because they are "just" a search company is to say that Microsoft had problems "just" being an operating system company until the early to mid 90's (say 20 YEARS after they started) when office took off.
What a week to lose access though!!! The portfolio has had a rough week thanks to the decline in DFR, my Asian funds taking a hit and some of my lower beta holdings getting hurt after doing well for the beginning of the decline (energy related mostly). About 100bps hit so year to date I'm back to only 200bps ahead (roughly up 7% through Thursday).
I will address DFR and the markets in general in a separate note. I also plan to cover TSRA in a separate note. Here I will cover some earnings and thoughts on other stocks.
NVT -- wow. I haven't had the chance to read the transcript from the call yet but obviously it was a good quarter. I did not end up selling any more shares as I had hinted I might on Sunday -- I did some thinking after CIBC upgraded the stock and realized there was more upside than I had thought when I wrote my comments on Sunday -- turned out to be correct. I will offer more comments post my reading of the call -- probably over the weekend.
CME -- volumes up 40% for July is not bad. They also have a tender offer on the table for 11% of outstanding shares for $560 -- the stock should not move too much from that level for this month -- nice support. I am thinking about adding to my position here -- probably trim some asian exposure -- let's face it, does it really matter whether I have 22% or 24% in Asia? either way its a BIG number.
MA -- I'm keeping an eye on Mastercard -- another stock that has gone up a lot but that has what could be a good business -- need to do a lot more reading and thinking but thought I would mention that it is one that I am reading about.
Apple -- got to see an iPhone Wednesday night while at dinner with friends. The owner pulled up this blog while I watched -- very cool. Key thing to think about is that right now its an expensive phone but over time as WiFi service improves, as they add 3G (need better battery life to do so) then you could see people viewing it as a cheap computer rather than a pricey phone. Right now that is a prediction -- high probability that one day it will be reality. Once that happens then look for someone to worry about cannibalization of $1000 MAC laptops for $500-$600 iPhones. Right now I am hoping that GOOG will serve as my play on that trend rather than Apple (Google's stock doesn't seem nearly as risky). One of these days when I'm low on things to write about I will pontificate some on Google -- most people in the media don't get them. To say that Google has problems because they are "just" a search company is to say that Microsoft had problems "just" being an operating system company until the early to mid 90's (say 20 YEARS after they started) when office took off.
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