As I had some more time to think about my dinner last night -- you know the one where I learned the next depression is starting any moment -- I realized that as David Tice presented his case of doom and gloom, no one really challenged him. None of the questions really argued with his positions -- no push back. That either means the audience was just there for the free meal (Hello!) or they agreed enough with Tice not to argue with him. probably a mixture of both. Amazing that he could be that bearish and no one choose to argue with him.
sure seems like we are at a near term pause in the decline as investors have gotten too bearish.
Spoke to a friend tonight and they reminded me that the charts of all the financial stocks are not buyable yet -- downtrends galore. That would include my newly beloved Moody's but I am hopeful the eventual bottom isn't too far from here.
TSRA -- listened to a conference presentation and the Q&A session posted on the website. Fascinating stuff -- they are very confident they will win the trials coming up, which will have a huge positive impact on their royalties. A few key points:
65 of 70 licensees signed up to pay for the technology without TSRA having to litigate.
only litigated the same handful of patents because they were proven but they do a bundled deal for 1100 patents -- most sign 5-7 year deals including MU despite the fact that some of the patents used in the litigation will expire in a few years. They plan on expanding the patents they use to get more visibility towards ones that don't expire in the next couple of years to help investors realize their royalties won't end in a few years.
spent over 10 years and 100 mill developing their CSP packaging technology and then the last 7 years setting up licensing deals for it.
wireless and DRAM have the same revenue potential but their share of DRAM is 2X wireless. If they win all their trials in the next few months, likely to see wireless share more than double. Cowen estimates $3 in earnings power post win -- that is fully taxed I believe. If they win, expect the stock to pop -- it could very easily move towards $50. Since litigation is risky, many are waiting until post win to buy. Plus there is no telling what the economics will be -- can they get good pricing or will these companies string this process out by appealing decisions,etc. This could be wrapped up in a few months or appeals could drag it out for another year plus.
They also were very confident in their optics business reaching the $100 mill in 2010 revenues -- in fact they believe that estimate is low. TSRA also talked about adding another leg of growth -- looking for new tech areas that they can build into $100 mill revenue opportunities in the next 5-7 years. They consider themselves to be an infrastructure company similar to MSFT, CSCO, ORCL, QCOM, etc. Its a great opportunity in the sense of more predictable growth with great margins and cash flows.
CME -- why has the stock dropped over $100 in the last few weeks? because in the waning days of december 2007, the WSJ talked about a consortium of brokers starting a competing exchange. Everyone dismissed it until Credit Suisse put out a note saying that they had done a lot of due dilligence talking to futures traders at brokers and hedge funds and come away with the impression this is a more serious threat than many believe. All the other analysts who follow the stock have generally made theoretical arguments that the new competition won't be very successful but none of them actually talked to anyone involved. The CS report argues the partners in the new exchange represent as much as 40% of the volume in treasury futures -- that's a huge volume number that has the potential to provide reasonable liquidity.
Still despite CS's comments, I am skeptical that anything comes of this -- consortiums are impossible to keep together and building exchanges is very difficult especially against CME, which is generally regarded as having the most innovative management teams of all the exchanges.
Volume trends also remain good too. still like the stock -- chance to buy in much cheaper than expected. still figure on $20 in 08 earnings.
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