Mehul's thoughts on stocks & technology

I won't be far off the mark if I say that this decade clearly belonged to XP. Windows XP was first launched in 2001, and as far as I can recall, it took a while for people to give up their love for Windows 98, and move up to XP. Though the product at launch was unstable and buggy, Microsoft improved the stability and performance over time (matching Bill Gates's philosphy in 'Business@Speed of Thought'). 
Windows Vista, released worldwide in 2007, received a lukewarm response from the corporate world (though it sold twice as many copies as XP in the first month itself). The terrible initial reviews, gazillions of compatibility issues, licensing costs, very short life span etc., all fueled the corporate world's hesitation towards Vista. It even managed to get #2 spot on Tech's all time top 25 flops. 
Now that Windows 7 release date is around the corner, corporate world should get ready for the migration journey and start thinking about making some investments in IT again. While the extended support for XP won't end till 2014, I am not sure if it'll be possible for organizations to procure new copies and licenses after an year or two. Gartner is suggesting companies to move over to Windows 7 by 2011 / 2012. 
I guess, you really have to work in a large company to appreciate the time and money it takes to make this journey. There are countless internal / customized softwares and applications, all of which need to be tested for security and compatibility. That's apart from validating the OS itself. Then, the licensing costs for the OS, and other third part apps come into the picture.
This time however, no matter how much it costs the companies, they will have to migrate to Windows 7! Though companies succeeded in avoiding Vista, thanks to XP's extended availability and support, this time around, that won't be the case. I guess the good news is, the initial reviews of windows 7 are very encouraging. The OS is supposed to be a lot faster, and also a lot less annoying ( as compared to Vista)
Only time will tell how successful Windows 7 will be, but if I had to bet, I'll put all my money on Windows 7!Speaking of money, I think, as the economy gets back on the track by mid 2010, and companies get ready to invest in IT, it might be a good time to buy stocks like Intel (NASDAQ: INTC), Microsoft (NASDAQ: MSFT), HP (NYSE: HPQ), and Dell (NASDAQ: DELL)
My prediction about Windows 7's success should in NO way undermine my loyalty towards Apple. I remain as always, a loyal fan! :) It's just that the premium price tag and a totally different architecture keeps most of the corporate world away from the awesomeness that is APPLE! 

There’s no way to know and track the thousands of stocks that trade on Wall Street every day. However, every once in a while you come face to face with a stock that you have been watching from time to time, but it suddenly starts galloping and you are just left staring at it thinking it has already gone out of reach…

Palm Centro

Palm Foleo

Most of the things that happened last year in the financial markets will probably be remembered for quite some time to come. Apart from the housing crises and global economic meltdown, the fluctuations in the Oil prices will take quite a prominent position as well. After starting the year (2008) at around 80 dollars, oil prices maintained their steady climb to reach up to as high as 147 dollars, and consequently broke whatever vain attempts the economy made to recover midyear. The rebate that people received from the government mostly just vanished into thin air! That is when the economy threw in the towel, and the conditions deteriorated very rapidly! The unemployment numbers started skyrocketing, and people just couldn’t afford travelling as much with gas prices hovering around 4 dollars. As a result, the demand for oil suddenly went south, and the oil prices came down much faster than they had gone up, touching a low of about 30 dollars! 


This year, started with about an average price of 41 dollars, and today Oil closed at 58 dollars! Just considering 2009, that’s already a more than healthy return! (~35%). However, if you had gotten into the market when the price was 30 dollars, you would have almost doubled your money by now. Now, the big question is, will this rally continue? Is it a good time to enter the market? And how high will the prices go?

Graph taken from www.opec.org

I don’t think there’s a simple answer or one interpretation for these questions. If in fact there was one, everyone would have been extremely rich by now! Last year was different in many ways. As the stock market in general tanked, investors tried to look up at other arenas where they could still manage to get a respectable return on their investments. As a result the climb in the oil prices was partly driven by speculation and greed. This year, it’s slightly different. The stock market seems to be holding on its own, and is making a decent attempt to recover now. So may be the focus on the oil prices won’t be as stern as it was last year?

On the other hand, the recovering economy will need more and more fuel for its growth and as the unemployment numbers stabilize (and eventually start declining) more people might decide to hit the roads to enjoy the travel season that’s already here on the doorsteps.  Will the oil prices rise as much as they did last year? I highly doubt it (but then really anything is possible!). Nevertheless, oil is still very modestly priced, and should go up further unless something very drastic and unexpected happens.

If you are not very keen on investing in commodities directly, may I suggest some fallen angels in the oil sector like Stone Energy Corp. (NYSE: SGY)? Most of the Oil stocks are directly related to the Oil price. If it goes up, they go up as well. For example, SGY varied between 1.55 and 73.96 in the last year alone, roughly corresponding to the drastic variation in the Oil prices last year. This year, it’s already off its lows, and is currently trading at around 7.67.  If the oil prices continue their climb, may be this stock will double or even triple? With a market cap of just 306 million at the moment, I don’t know whether it’s advisable to invest a lot of money into it (unless you have a huge appetite for risk). However, the company has been around for quite some time, and is not likely to disappear overnight.  

I am by no means an expert on oil prices, so please consider this just a simple analysis of the demand and supply principles as they prevail in a free market. One you mix these principles with a flavor of speculation and economic uncertainty, you get something that’s very hard to predict. So, happy investing!

Reference:
http://money.cnn.com/
http://en.wikipedia.org/wiki/Price_of_petroleum
http://www.opec.org/Home/basket.aspx

Coinstar will be announcing its 1Q result after market close tomorrow. Most of the analysts seem to be very bullish about the stock at this point. While I am hoping the results will provide the stock price a further boost, I am actually feeling that it's getting a little overpriced now. I have held this stock for more than an year now, and it has provided me a relatively healthy return of about 25-30%. It might be time for me to let this one go! I think I will decide that after reading the call transcript tomorrow!


Found this interesting article about the stock: Economy may have Coinstar, redbox on a roll

I wouldn’t be exaggerating if I told you that Apple was the only reason that got me interested into the whole stock market. Seriously! For most part of my college, I didn’t really know what apple was all about. I had seen some white earphones, and some click wheel devices, but didn’t understand what all the rage was about. However, that’s when I saw the video of Steve Jobs introducing the Ipod Nano at a keynote in 2005, and watching the presentation was like experiencing a gadget heaven ( if infact there is one!). It’s not like there weren’t any good MP3 players in the market. There was just this whole new degree of coolness attached with it. I saved some money and ordered it soon after it was released. That’s when I truly became a diehard fan of Apple.  (If I would have bought 5 Apple shares worth 250 dollars instead of buying an Apple Nano for about the same amount, I would now be sitting at 1250 dollars! But I digress…).

Anyway, at that time I didn’t really follow the stock market that much. It wasn’t until 2007 that I took serious notice. The keynote where Steve Jobs introduced the Iphone left me mesmerized, just like millions of other Apple fans(A trip to gadget heaven all over again.) It is only then that I observed how Apple’s stock went from about 87 dollars all the way up to 192 dollars in a matter of few months. However, the stock rose so rapidly, it felt like an opportunity that I saw and still let it pass by. I guess it’s true...most of the stocks that go up, eventually come down. When Apple’s stock came down sharply towards the starting of 2008, the opportunity was just too good to resist.  It wasn’t like conditions at Apple had deteriorated or something. Macs, Ipods and Iphone were simply blowing off all the numbers, and the company was unstoppable. I had no idea why the stock price had come down so sharply, but I guess I didn’t care…after all it was Apple!

Within a matter of few days I bought my first book on stock market investing (Charles Schwab's New Guide to Financial Independence Completely Revised and Updated: Practical Solutions for Busy People) and figured out how to open an account for buying stocks. I didn’t waste even a moment, and loaded up about 50% of my portfolio with Apple’s stock. The first few days were simply amazing. Any free time I could find at office and home went at staring at the stock price go up and down. Watching money earn more money was new to me, and I was enthralled! May be, I put in money at just the perfect time. The stock went from 119 all the way up to 188 in a matter of months. I couldn’t believe earning money could be so simple. However, that’s when the whole market came crashing down. Apple’s stock was not only affected by the global economic crises, but also by rumors of Steve Jobs health. I didn’t want to sell Apple’s stock, mainly because the company was still doing terrific. The Iphone 3G was going to be released all over the world, and the Macs were doing great as well (Mac Air was pretty cool too). I thought there never was a better time to buy Apple’s shares, and at that time I didn’t really give in to the health rumors. Consequently, my portfolio went from green to deep down in the red. While, I had my doubts from time to time, I never actually thought of selling the stock. That’s when Steve Job’s decided to take a couple of months off because of health reasons. Since the analysts had already seen this coming, the stock didn’t go down as much as I had expected. In the last few months, Apple’s stock has regained its upward climb, and is charging ahead with some momentum. Whether the rally can be sustained remains to be seen.

Stock Analysis: I’ll break it down into positives and negatives for the stock, and then you can decide on your own.

Reasons for buying the stock:

1.       The company has managed to not only fend of the recession but also to grow as compared to its last year’s performance. There aren’t that many companies out there that can boast about that. No kidding!
2.       They somehow manage to find ways to keep making the products cooler, and the products just get better and better. Not only that, they somehow manage to find ways for additional stream of revenue ( for example, the App store)
3.       Apple has about $30 billion in free cash and literally no debt. This translates to about $30 dollars on each share just from the free cash flow. Add about $5.56/share for earnings. What I am saying is that if you buy an Apple share today that’s worth $132, you are getting about $36 back already (well sort off…) . So the effective price of share is actually just about $100.
4.       The stock has done relatively well in the past, and one can hope that it’ll continue to do so in the future.

Reasons for not buying the stock:
1.       The company is too dependent on Steve Jobs. While it’s true that Tim Cook seems to be doing a terrific job in his absence, I am just not sure if Apple can keep on innovating for a long time in Job’s absence. I strongly believe that if Steve Jobs doesn’t make a healthy appearance on June 8th, the stock is going to take a solid hit (and for good reasons..). It sort of is investing 101 that if the company is too dependent on one single person, then maybe it’s a good idea to stay away from it. Anyway, there is no shortage of excellent stocks to buy.
2.       The other biggest problem is that there are way too many analysts following the stock.  A quick look at Yahoo Finance shows that more than 30 brokers follow the stock. This simply means, that any news that comes out gets very quickly factored in to the stock. The stock becomes too prone to trading activities done by major investing houses.
3.       The expectations of people and analysts are way too high. The stock is prone to all the news that comes out of rumor mills (and ofcourse “people familiar with the matter" J). Already, “people familiar with the matter” are reporting that Apple will be launching cheaper Macs, some sort of tablet PCs and what not. While Apple hasn’t disappointed the analyst community very often, the expectations are sort of getting out of hands…and any time the expectations aren’t met, the stock goes down!
  
Strategy:
 It sort of is an unpredictable time for Apple’s stock. According to me, it’s performance in 2009 will be dependent on Steve Job’s return to some extent. If for some reason, his return is delayed, I would like to wait and see if Tim Cook can actually sustain the innovative drive at Apple. At this point, I wouldn’t recommend buying more stocks. However, if the price goes below 120, I might change my mind. If you already own some stocks, please hold on to them. If you are considering buying more, buy them when market corrects itself a little bit.
  
Price Target:

150 – 180 (depending on whether Steve Jobs comes back or not)

Disclaimer:  
The author currently owns share’s of Apple, however this can change at any time without notice. Please research the stock carefully before buying. While the author will gladly accept a large share in your profits, he might not be able to share your losses, so happy investing!

Reference:

http://finance.yahoo.com/q?s=aapl
http://www.google.com/finance?q=NASDAQ:AAPL
http://www.youtube.com/watch?v=PZoPdBh8KUs
http://www.youtube.com/watch?v=7GRv-kv5XEg

Wow, just came across this. Zacks made a list of 4 stocks to buy list public. ..One of the stocks is CSTR, pretty cool, huh?

Taken from : http://www.tradingmarkets.com/.site/news/Stock%20News/2303225/

Momentum - Coinstar, Inc. (Nasdaq: CSTR | Quote | Chart | News | PowerRating) Coinstar has received a bullish nod from the analyst community, with the next-year estimate projecting 88% earnings growth. The company's sales have been helped by its DVD rental kiosks located outside of grocery and convenient stores.

Okay, I must admit, I am really proud of this one… It first caught my attention last year when I started noticing people frequently queued up behind those red giant kiosks at grocery stores. Being a frequent movie watcher myself, I decided to give it a shot. The whole thing was amazingly simple (& cheap….$1 rental). I just chose a movie from the menu, swiped my card & it vended out the dvd in an instant. The receipt & later a reminder for return was automatically emailed to me. As if I wasn’t impressed enough already, they emailed me a free coupon just to try the service again.

The Redbox service definitely had attention now. The idea was novel & extremely convenient, & the price was more than reasonable. Since I am a huge fan of Peter Lynch’s methodology as well (observing consumer trends to find stocks) I decided to look up the company. At first I couldn’t find a whole lot more. Their website didn’t have any stock information, so I just assumed they were a startup and gave up the idea.  I guess the long queues behind the Redbox kiosks eventually motivated me to dig deeper. I mean this was my FIRST golden opportunity to pick a stock which could potentially be a winner.

Thanks to Google! I learnt that Coinstar was one of the main stake holders in the company. The company looked just about okay at first. They specialize in 4th wall products at major grocery stores. One thing I didn’t like about them was that the stock had sort of been stagnant for most part of their 10-11 years  history as a public company. But then as I read more, I realized that Coinstar had finalized deal with Walmart for installing about 2500 - 3000 coin counting & Redbox kiosks nationwide by 2010 or so (See here: http://www.forbes.com/feeds/afx/2008/02/11/afx4637648.html). Ofcourse, that meant significant increase in revenues gradually. I looked up at Yahoo finance, & only 4 analysts were following it, & there were no recent recommendations on the stock. (See here: http://finance.yahoo.com/q/ao?s=CSTR). I got more excited because the market was definitely missing this one, & loaded up my portfolio after monitoring the stock price for few days.

Inspired by Jim Cramer’s book (Sane Investing in an Insane world), I listened to some earning call recordings & it was amazing to see how Coinstar was beating estimates quarter after quarter. The stock price in accordance kept moving up & gradually reached a 52 week high of 38 dollars. Coinstar also increased its stake in Redbox & announced that it was planning an IPO for Redbox in mid 2008. However, the market conditions deteriorated very rapidly, and I guess the IPO plan just sort of disappeared. Even though the company was seeing strong quarters, the stock price came down from 38 to 15 in a matter of a few weeks along with the broader market. (Could be related to the death of the chairman as well, I am not sure..). Anyway, I had no intention of letting this stock go, but at the same time, I missed the window to buy some more of it. That would have been awesome!

Now, as the market is recovering again, CSTR has recovered very sharply, & is flirting again with the 52 week highs. I am assuming that the recent rise is in anticipation of the 1Q result which the company will announce on May 7th. I read Jim Cramer’s comments that the stock was rising in anticipation of a buyout (See here: http://www.thestreet.com/story/10492906/1/mad-money-lightning-round-honeywells-a-steal.html?cm_ven=GOOGLEN), but I couldn’t really find anything concrete to support that.

Recently, Netflix, another company which is seeing unprecedented growth in these uncertain times acknowledged the threat to its business from DVD kiosks. Quite surprising!  (See here: http://www.afterdawn.com/news/archive/17790.cfm)

Strategy: Till last week, I would have really recommended this stock, but since it has risen almost 20% since then, I am not sure if this is the perfect time to buy it. I’ll recommend may be buying a minority stake now and then waiting for a couple of weeks before buying more. The 1Q result should most probably provide a little more lift to the price, but I don’t know if the stock will stay at those highs for very long. I still think this is a solid company, with a great business model & growing revenue. It’s just that the sharp rise in the last week makes me feel like the opportunity window has been missed, at least for now. I also looked at the MACD graph. Though right now it’s in the positive, it’s sort of hard to predict if it’ll stay that way for long. I guess for me the MACD graphs are just more of a way to understand why the prices went up or down in the past… they aren’t really very helpful (at least for me) in predicting future price movements.

Price Target by end of 2009: 45-50.

HAPPY INVESTING!

DISCLAIMER: The author currently holds stocks of CSTR, however this can change at any moment without notice.  This is merely a stock analysis & is prone to author’s views & expectations of the company. PLEASE research the company extensively before buying or selling the stock! The author should not be held responsible for any gains/losses suffered.

Links/ References:

http://www.forbes.com/feeds/afx/2008/02/11/afx4637648.html
http://finance.yahoo.com/q/ao?s=CSTR
http://www.thestreet.com/story/10492906/1/mad-money-lightning-round-honeywells-a-steal.html?cm_ven=GOOGLEN
http://www.afterdawn.com/news/archive/17790.cfm

I have been following the stock market pretty closely for about a year & a half now. When I entered the market, the stocks were in recovery mode with the hope that the credit crises won’t be as bad, & that Government’s rate cuts & other steps will usher in a quick recovery. However, the hope quickly faded away, & the lower interest rate gave rise to inflation, & back breaking oil prices. Each day, I used to watch oil prices (& oil stocks like SGY) climb up to new highs, & rest of the market simply falter.

Thanks to the sky high oil prices, the 150 billion dollar stimulus plan pretty much came & went unnoticed. Combined with all this, & the rising unemployment, consumers sharply pulled back & suddenly inflation fears changed to deflation fears (& for good reasons..). At that time, while most of the retail stores were reporting a sharp drop in sales, companies like Walmart & Mc Donalds were reporting a modest rise in same store sales. Consequently, while rest of the stock market came tumbling down, stocks like Walmart & Mc Donalds were very close to their 52 week high. Then as the unemployment rose, more & more people decided to refresh their skill sets & as a result stocks like Apollo Group & Devry University rose to new highs!

Now, this is a really eye opening experience for me…As the fear of a global pandemic is rising, airline & tourism stocks are taking a hit while some of the biotech stocks (even obscure stocks, with not much history) are going through the roof!  (See here: http://money.cnn.com/2009/04/28/markets/thebuzz/?postversion=2009042813). Stocks like Roche & Glaxo, the pharmaceutical companies whose products are being used to treat the disease (for now atleast) are doing very well too. Several countries are piling up the inventories for these medicines, & that’s going to help these stocks in the weeks to come.

I guess what I am really trying to say here is more of a self realization than anything else. No matter what the economic season is, & how bad the market is doing; there will always be one sector or the other that’s seeing unprecedented growth! The trick lies in identifying those sectors, investing at the right time & then getting out while you are in the green. Ofcourse, this strategy requires a lot of time & attention, & a fair knowledge of the sectors involved. For now, I’ll stay with the sectors that I think I understand, but nevertheless, these economic trends are fairly interesting to observe!

 Reference:
http://www.guardian.co.uk/world/2009/apr/30/swine-flu-drugs-glaxosmithkline-roche http://money.cnn.com/2009/04/28/markets/thebuzz/?postversion=2009042813  www.greekshares.com/decision.php

Tata Motors has been basking in international limelight for some time now, & mostly for good reasons. In June 2008, Tata Motors acquired Jaguar & Land Rover brands from Ford. Continuing ahead with full speed, Tata showcased the world’s cheapest car last year, Tata Nano, costing a mere $2000 for the base model. Bookings for Nano started in April this year, & while the official numbers are still due, many news sites are reporting that an estimated of 1 million cars have already been booked! (Assuming the 1 million number, the applications itself would have brought in about six million dollars!)

Before I continue, let me first iterate that Tata Motors is by no means a new guy on the block. It has been in business since 1945, & is one of the leading manufacturers of commercial vehicles in India. Tata Motors has met an amazing success in the passenger vehicle landscape as well, with hits like Sumo, Safari & Indica to name a few. With the launch of Nano in India, & Electric Indica in parts of Europe, & India in the next year or so, it is not hard to anticipate which way the revenues will be heading. To add icing on cake, prices of commodities like steel & aluminum are down, helping Tata with maintain a healthy profit margin.

The stock has recovered sharply from its 52 week low and has more than doubled in the last two months itself! While that might feel like a missed opportunity, let me point out that it is still way below its 52 week high. With all the new exciting developments & a global economic recovery (which seems to be underway…HOPEFULLY it’ll stay that way), I feel positive about company’s prospects.

While I strongly recommend this stock, there is some mixed news as well. When Tata acquired Jaguar & Land Rover last year, it assumed $3 billion in loans (which is almost as much as its market cap considering recent stock price). The good news is that it has already paid $1 billion back to the lenders. The bad news is that the credit crunch is affecting company’s ability to refinance the $2 billion dollar loan, which is due soon. Tata recently reached out to public, & raised around $400 million dollars which should help somewhat.

A look at financial statements & ratios reassures me. The P/E ratio is comparatively low, the dividend yield is great! (4.65%), & the cash flow seems to be OK. The company does have a lot of loans, but that can be explained by its aggressive expansion & acquisitions worldwide. The ‘Net Receivables’ did raise my eyebrows for a minute but the growing number seems to be consistent with the overall revenue growth. Though, I don’t follow the technical analysis often, the MACD graph suggests that financial institutions are pouring money in to the stock, which is always a good sign!

In the coming week, the stock might go either way when Tata releases Nano booking numbers. I am inclined to believe the 1 million figure, & if Tata meets that, it should boost investors’ sentiments. While I have nothing against short term trading (Any legitimate profit is good profit!), I would certainly recommend this stock for long term.

Recommended Strategy : Buy majority ( or at least half) stake now, If the market punishes the stock around June when the $2 billion loan is coming due, scoop up some more!

Price Target: $20 by end of 2009

HAPPY INVESTING!

DISCLAIMER: The author currently does not own any stocks of TTM, however this can change at any moment without notice.  This is merely a stock analysis & is prone to author’s views & expectations of the company. PLEASE research the company extensively before buying or selling the stock! The author should not be held responsible for any gains/losses suffered.

Links:

http://www.topnews.in/tata-nano-bookings-close-around-one-million-cars-booked-2157390
http://www.meps.co.uk/allproducts%20steel%20price.htm
http://www.bloomberg.com/apps/news?pid=20601091&sid=aLEWE.wB3y7Q&refer=india
http://en.wikipedia.org/wiki/Tata_Motors
http://www.google.com/finance?q=NYSE:TM
http://finance.yahoo.com/q/bs?s=TTM&annual