rovo's Market Journal -- 2011

[livinincali]

I think our underlying economy is stronger than people think. Call me an eternal optimist but if the economy picks up speed and congress gets it's act together we will detach somewhat from Europe.

If you're somewhere in the top half the economy is fine. Our company is looking to hire highly skilled technical people, but we can't really find them. The problem with our economy is that a construction worker can't easily be a mobile app developer. The other bigger problem is we have too much debt built up in the system. That debt needs to be cleared one way or another. We need to grow without consuming more debt and we haven't down that in 30 years.

[ModE98]

",,,,,,,,,,and congress gets it's act together"

Cali, that takes extreme optimism. Washington D.C. appears totally disfunctional to me.

Well, it is said, "miracles never cease", so we shall see.... 2012/13 maybe?

Suppose this is political posturing coming up into the Nov elections next year, but can we take another full year and a month of this "garbage" ... probably, have no choice. Such is life in the good old USA today

[rovo]

In post #982 I pasted a news item from JPM about reduced iPad production for Q4. This morning Zacks.com reported as follows:

• i-Phone maker Apple's (NASDAQ:AAPL) shares fell marginally, by 0.28% to close at $403.17 after the company said it may lower its production of iPads in the fourth quarter.

The difference is the Zacks bullet says "the company said". I searched through the Apple site for info but I couldn't find anything reported about this item. In my mind there is a significant difference between a "rumor" and "the company said". Anyway, so this morning I fired off an email to the Apple media people asking for clarification of this item. I have yet to receive a reply from Apple and I probably will not receive one.

[rovo]

This is really getting funny about the iPad production.

excerpt from www.bloomberg.com/news/2011-09-26/apple-report-by-jpmorgan-asia-staff-not-view-of-u-s-team-moskowitz-says.html?cmpid=msnmoney

JPMorgan Differs With JPMorgan on Apple IPad
By Adam Satariano and Edmond Lococo - Sep 27, 2011 9:33 AM ET

JPMorgan Chase & Co. (JPM) analyst Mark Moskowitz said research from his colleagues in Asia about a cut in Apple Inc. (AAPL) iPad orders doesn’t represent the views of the securities firm’s U.S. team.

“Apple is fine,” Moskowitz wrote.

Apple is cutting orders to vendors in the supply chain for its iPad tablet computer, a move that may mean slower sales for companies including Hon Hai Precision Industry Co., according to the earlier report by Hong Kong-based JPMorgan analyst Gokul Hariharan.

Analysts at other firms also issued research aimed at quelling speculation that demand for iPads had diminished -- a concern that dragged down Apple’s stock as much as 3.2 percent in Nasdaq Stock Market trading yesterday. Chris Caso, an analyst at Susquehanna International Group, said the resulting “chatter” was “misleading” and Gene Munster, at Piper Jaffray Cos., said changes in orders may be the result of Apple moving some iPad manufacturing out of Asia to Brazil.

The earlier report “has the equity markets worried about Apple,” Moskowitz wrote yesterday. “Mr. Hariharan’s report focuses on how Hon Hai could be impacted by potential iPad sell- in order cuts. This alert is not the view of the U.S. IT Hardware team.”

[rovo]

It is always fun to make a projection on an investment. Last quarter my projection for Apple earnings was significantly lower than what the company reported but much closer than what the analysts had projected.

Apple's fiscal Q4 ends at the end of September and the numbers are to be reported on October 18th. Current analysts projections are for an earnings range of $6.05 to $8.22 with the consensus at $7.14.

The "rovo" projection Apple's Q4 earnings is $9.00 with a tolerance of -5%, +10%. The tolerance works out to a range of $8.55 to $9.90 but I like the round number of $9.00 per share.

I might as well put up some projections on share price just for the heck of it. I expect Apple shares to be selling for $500 in January 2012 and to be between $600 to $800 by January 2013. This assumes there is no collapse of the EU, no significant event in the USA, and Steve Jobs is still with us.

[livinincali]

On AAPL $9.00 seems a little high for this quarter. Certainly Q4 2011 should generate that kind of profit but there was nothing much of interest for AAPL this quarter. Q2 had iPhone on VZ and iPad2 launch. Next quarter will have iPhone5 launch but this quarter didn't have much. I'm guessing AAPL QoQ earnings are going to be pretty close to flat, just because people are holding out for iPhone5. I'm guessing more like 7.50-8.00. Beat but not a super crazy beat.

[rovo]

Ah, a little competition on the numbers for Apple. Great! Anybody else have an estimate for Apples earnings to be reported on the 18th of October? How about a poll on the earnings? Any interest for anyone else?

[peace467]

I am very interested in Apple. My earnings estimate is $6.47.

I am long Apple.

[usaone]

Apple $7.11

[rovo]

I put up a poll thread so if peace467 and usaone would be kind enough to put their projections in to the poll, I would appreciate it.

[rovo]

Some info on iPad2 sales but not from the company.

Apple to ship more than 20 million iPad 2 tablets in Q3 .... By: Zach Epstein | Sep 9th, 2011 at 10:11AM

Those who follow technology press closely were disappointed to learn that a revamped iPad rumored to launch this fall — possibly a “Pro” model with a Retina Display — is likely not going to become a reality. Apple never made any official mention of the device, of course, so we have no way of knowing whether or not earlier rumors were accurate. What we can seemingly say, however, is that consumers don’t seem to care. Apple continues to sell iPad 2 tablets as fast as its manufacturing partners can ship them, and a new report from Taiwan Economic News on Friday suggests Apple continued to see unprecedented demand so far this quarter. Read on for more.

Without specifying the source of its report, Taiwan Economic News states Apple’s main iPad supplier, Foxconn-owner Hon Hai Precision Industry Co., has revised its third-quarter iPad 2 shipment estimates up to more than 20 million units. The firm had previously projected that shipments would total 14 million units according to the report.

During its last earnings call, Apple said it sold 9.25 million iPads in its June quarter. It should be noted, however, that iPad 2 supply did still fall short of demand at times in several regions during that period. If shipments of Apple’s popular tablet are finally able to meet or surpass demand, third-quarter iPad sales — which would correspond with Apple’s fourth fiscal quarter — could balloon significantly.

Apple will report its September-quarter earnings next month.

[rovo]

The iPhone4 sales may be declining as the model switchover occurs.

Foxconnfs iPhone 4 Shipments Decrease Due to Adjustments for iPhone 5? ..... By Gary Ng on September 12th, 2011

A recent report by Digitimes states electronics manufacturer Foxconn has seen a decline in August revenues, a decrease of 6.55% sequentially to $7.39 billion USD, based on the decline of iPhone 4 shipments according to industry observers.

The reason for this adjustment is linked to the production of the next generation iPhone 5, reported to be under production soon with 85% of units to be produced by Foxconn, and the remaining supply to be made by Pegatron Technology. Foxconn has reportedly attempted to increase their yield and efficiency rates to retain Applefs business.

Earlier reports have stated suppliers will get GM seeds of iOS near the end of September, to coincide with a speculated mid-October iPhone launch.

25 Million iPhones to Ship In the Fourth Quarter?

Another Digitimes report cites a strong forecast for small to mid-sized panel makers for the remaining quarters of 2011, based on the launch of the iPhone 5. Shipments of the next-generation device, according to observers could reach 25 million units.

Recent renderings based on eleakedf iPhone 5 cases have shown a thinner, wider device with a 4 screen. Wefre almost into mid-September, and itfs only a matter of time before we hear about a new device being launched.

[The Virginian]

Apple will not dominate forever - I like Apple but people act like it is the only game in town - Competition is a coming so beware - please.

Putting to rest the endless speculation, Amazon on Wednesday officially introduced not one, not two, but four new Kindle devices. The company aims to lock up the e-reader market with an entry-level $79 Kindle, and to do what countless tech companies have failed at: building a color tablet device at a reasonable price that can compete with Apple's wildly successful iPad.



Read more: www.foxnews.com/scitech/2011/09/28/amazon-to-take-on-apple-ipad-with-kindle-fire-tablet/?test=faces#ixzz1ZHOIytpS

[rovo]

Nothing lasts forever but I don't see them fading in the foreseeable future (2 to 3 years).

[The Virginian]

It could happen as early as the 4th Qtr 2011.

A lot of people just might buy the Fire instead of the Apple I Pad as a Christmas present.

If nothing else it might force Apple into deep discounts on the I-Pad.

[rovo]

Sept 28, 2011 15:22:11 GMT -5 The Virginian said:

It could happen as early as the 4th Qtr 2011.

A lot of people just might buy the Fire instead of the Apple I Pad as a Christmas present.

If nothing else it might force Apple into deep discounts on the I-Pad.

Yes, it could happen that way. I just don't think it will. There is no sure thing in the markets. One just has to do his own research and live with the consequences of his actions. I own a few shares of APPL and I think it will turn a very nice profit for me but it is just my opinion (so far).

[rovo]

Two of my large positions have gone stagnant of late. Both appear to be waiting for important news and when the news is released the stocks will react.

Ford (F): Ford is stuck at $10 per share and I believe the market is waiting for two things. First and most importantly is the on-going talks with the UAW. GM has reached agreement with the Unions but Ford has yet to do so. The UAW is talking to Ford and Chrysler but the talks with Chrysler have hit an impasse and the UAW is now focusing on Ford. I don't know what the talks are focusing on with Ford as not much is being published on the talks. Here is a link about the UAW talks: www.nytimes.com/2011/09/27/business/ford-contract-talks-intensify-as-union-prepares-for-strike.html

The second item affecting Ford shares is the earnings statement expected to be released the week of the 31st of October.


Apple Inc. (AAPL): Apple appears to mired in the muck at $400 per share as the market awaits the earnings report due on the 18th of October. In addition to the expected earnings report there is also considerable action taking place on the legal fronts. Apple is contesting a couple of devices by Samsung in several major markets. It should be noted that Samsung is the major supplier to Apple for touch screens and semiconductors. Apple is claiming Samsung has copied the iPhone and the iPad and is about to release these devices to world-wide markets. To date the courts have sided with Apple but who knows what the outcome will be. Australia is the latest battlefield for these suits. Samsung has a lot to lose with this battle .... major markets and their best semi customer. Is it any wonder why Apple is switching suppliers for semiconductors going forward?

[IPAfan]

My positions have been beaten up badly over the last couple months, but I don't see a lot of cause for concern since I can wait, and I think most of my holdings are significantly undervalued. I'd like to add more to most of them, but will probably select one or two to add new funds to.

Biggest position still TTT - This company has been taking a beating lately, falling from 8.70 at the high this year down to the current 6.70 or so. I think $6.70 is a bargain screaming bloody murder right now. This company is changing its name, and issuing a special dividend/spinoff of non-core assets. Dividend yield is about 3% at this price (excluding the special dividend). $5.85 net cash per share. Book value of $8.72. Cash earnings between $.50-$1.00 per share a year.

Phillip Morris Int. - This company has still done quite well overall this year. I'd like to add more to get a 5% dividend that's growing at a healthy rate. More importantly, this is what I consider to possibly be one of the very finest businesses. It's a good buy at this point, but as good as Terra Nova at less than liquidation value with the resource business income streams thrown in for free?

Fairfax Financial Holdings - This company has performed pretty well this year, basically giving me a very slight gain for the year when other companies in the insurance sector have been slammed. The company now trades above book value, has a large mediocre insurance business, and brilliant investment management.Out of all my positions I'm more tempted to sell Fairfax than any of the others. However, this company currently acts as a bit of a hedge on terrible economic performance since the company has hedged its equity positions, has a lot of bonds, and stands to profit enormously in a deflationary environment.

Endurance Specialty Holdings - This company has performed the worst of all my holdings this year. It had a great 1Q, and then took some fair sized losses in the japan earthquake (but lost even more market cap), also had a bad 3Q. This is just the way the insurance business works. However, when I look at this company it has a fast growing US agriculture insurance business which is making underwriting profits. Over the company's history it has made underwriting profits in specialty lines and reinsurance. The company got creamed in re this year, but the asset value has remained mostly in tact. Essentially the Reinsurance losses were absorbed by the specialty and investment profits. The company trades at a substantial discount to book value, has a 3.6% dividend yield, has likely over reserved for the recent catastrophe events, and IMO has a lot of growth ahead with the ag business, and possibly reinsurance.

Altria - I don't like this company as much as Phillip Morris, but it's great to own when the market is falling. This trades more like a liquid bond than a stock, and yet the yield is great, and growing.


I'd like to add to all of these positions, except possibly Fairfax Financial, at this point. However, I'm somewhat cash strapped, and can't put in as much money as I'd like. Over the rest of the year I expect I can probably add about 10% of the current portfolio size in cash, also should be getting a special dividend from terra nova that will add about 10% of the portfolio's size for reinvestment. I'm actually hoping that my stock's prices remain depressed (or even fall more) over the next few months so I can pull off an investment at or below current valuations. I think Terra Nova (soon to be MFC Industrial Ltd- MIL) continues to present the best risk:reward scenario. The downside is largely protected by a strong balance sheet and asset valuation, the upside potential is obvious based on earnings and growth. Even though Terra Nova has a safe asset mix, the trading in shares is more volatile than average....a perfect example of the type of shares I want to invest in.

[rovo]

Sept. auto sales seen rising 8.3%: Edmunds.com .... 12:54p ET September 29, 2011 (MarketWatch)

About 1.04 million new cars will have been sold by the end of September, Edmunds.com estimated Thursday, down 3.1% from August but up 8.3% from the same month a year ago. The new projected seasonally adjusted annual rate will be 12.9 million light vehicles, a pace that marks the highest monthly rate since April, the last full month before disruptions from the Japanese earthquake and tsunami hit sales. "Some consumers who deferred purchases earlier this summer are responding to improving vehicle supply and more competitive prices, and those purchases will be reflected in September's sales results," said Edmunds.com Chief Economist Lacey Plache in the sales forecast. "But declining economic conditions are keeping other consumers away from dealer lots and will continue to do so at least through the end of the year." Honda and Ford are seen posting the biggest sales gains, Edmunds.com noted.

[livinincali]

A lot of the high flier mo mo stocks have been suffering lately while the beat stocks are getting a look. AAPL, BIDU, CMG, SODA, etc. are all getting hit right now while the XLF and KRE have been soaring in the past couple of days. Some are blaming hedge fund redemption as people pull money from hedge funds this year (they've been performing poorly) and the hedge funds are liquidating their winners, i.e AAPL. It's also the end of the quarter so we've got window dressing going on. That said the crazy volatility we've been seeing lately puts higher odds on the continuation of a bear market. I do think we'll see some kind of explosive rally in the next 2 months, but that might be the last good chance to get out of the market for the intermediate/long term. We've been trading under the 200 day moving average and burning off oversold on the daily for too long now, if it was just going to be a correction we should have been rallying already.

[yclept]

I too have taken a beating over the last month. Down about 6.3% for Sept to date. That's worse than $spx which is down about 4.8%, but what makes it really a lot worse than it appears on the surface is that I was roughly 50% cash over this entire month. I got caught on the wrong side (or late, or whatever) on several plays in 2X and 3X leveraged short plays and bailed. Then a couple of days ago I decided JKS had fallen farther than it should have -- wrong! It's fallen another 14.6% over the three days I've owned it.
Most of my invested money is in high dividend payers right now: NLY, MFA, HYMB. I still have a bunch in Swedish Krona FXS and some EWS Singapore ETF as a way to expatriate some money. Looks like I ran away from the dollar at just the wrong time. Both of those are down over the couple of months I've held them. EWS is down 9.16%, which is kind of a revolting development.
I also bought 1000 sh of MSFT early this week @ 25.005 and sold 10 covered calls against it for 1.06. I'm hoping it stays above 25 so I can just get called away and keep the premium which will amount to roughly 1/24 or 6% for the month. The call closed at 1.36 yesterday, so this wasn't timed very well either. Today it closed at 1.15, I think only to make me feel less the fool.
If it doesn't get called away in October, I'll look at it again and either sell a call again, or just it and have the money available to take better long positions in late October or early November which should be the beginning of this year's positive seasonal trend.
The negative seasonal trend this year ("sell in May and go away") certainly held true. I wonder if the positive seasonal trend will as well.

[rovo]

Hey Yclept, I'm glad to see you posting a bit. I've missed our exchanges of ideas.

I've been hit fairly hard this quarter but then again this entire year has been sucky for me. I feel like a ball player in a slump. I'm also losing my motivation to even play in the markets. Too much time invested and too little returns for that time. I've been trying to reposition into longer term holdings and although they are currently doing blah, I think I'll be fine going forward.

Best of everything to you my friend.

[usaone]

Rovo ..as Fed stimulus fades and Private money SLOWLY comes back into the market its going to be choppy for a wile.

Tough picking this year.

[usaone]

The only one that can hurt Apple is Apple. If they stay aggressive they wont have compitition for many years.

[yclept]

Message deleted For Violation Of C.O.C


Update May 28, 2011

Private messages are called "private for a reason. They shall not be posted on the board, in whole or in part.

[Driftr]

Read & understood.

[rovo]

Might as well post some of the things I've been thinking about this morning about Apple. While Apple is a major holding in my portfolio it is not the largest holding. It may be time to make it the largest holding with the recent price dip.

On Friday, 30 Sept., 2011, Apple closed at $381.32. The 50 Day SMA is about $385.00 so the close is below the 50 SMA. The 200 Day SMA is about $353.

The lower Bollinger Band is about $369. It is unreasonable to expect the stock to dip below the lower Bollinger Band but the Band is flexible and the lower band will drop slightly if the stock continues to decline.

There is a trend line if one looks at the recent lows and this should have limited the recent decline to about $390. It didn't and it broke thru the lower trend line.

It is hard for me to wrap my head around this but it is conceivable for Apple to decline to the 200 Day SMA at $353. Whatever it is going to do, it had better do it quickly as the iPhone5 announcement is scheduled for the 5th of October. This should create quite a stir with the Apple stock unless the new phone is a dud with few new and better features.

My plan is to watch the stock movement closely and try to pick up a couple of hundred shares between the lower Bollinger Band and the 200 Day SMA. In dollars this range is $353 to $369.

Assuming a price of $360, roughly midway in the above range, the PE would be about 14 with the TTM earnings at $25.26. If we assume a conservative earnings for 2012 of $40 per share, then the forward PE is 9. That is correct, Forward PE of 9. Unbelievable !!!

Stocks usually have a PE of at least the earnings growth rate. Earnings of $25.26 (TTM). Project conservative earnings for the next 12 months of $40. This yields an earnings growth rate of 58%. Ergo, a PE of at least 58 would be typical. Apple has not had a PE anywhere near the growth rate and usually it hangs around 15. I think this is because nobody expects the fantastic growth rate to be sustainable. At some point it will not be sustainable but the question is when that occurs.

So, what would we / should we expect for a share price in 12 months? If we get the conservative $40 earnings per share and we assume a contracted PE of 15, then the share price works out to $600. A more reasonable PE of 20 yields $800 per share.

[2kids10horses]

rovo,

I think the recent AAPL stock price is due to two things: 1) Amazon has come out with cheap "pads" that may be able to give the ipad some competition; and 2) many of the rumours say no iphone5, but only a slightly upgraded iphone4S.

I have no dog in this fight, and I too believe Apple makes great products and I also think they'll do very well, but those rumours are affecting the price, in my opinion.

I will say that I will be getting my wife an iphone of some variation after the announcement. I have a 4 and love it. She doesn't need all the bells and whistles nor the large memory capacity. But she would like to have apps like the weather, a camera, a flashlight, email, etc. So, depending upon what they announce, it may be a 4 at el cheapo prices or a new one with minimal memory and data.

[livinincali]

Looks like the shorts got a little too short in this market and we got a tremendous short squeeze. Next couple of days should tell us if this is the start of a sustainable multi week rally or just a bear market relief rally. If its just going to be a bear market rally it should fail in the next 2-3 days. If it's going to be something more it should probably run higher over the next 3-6 weeks.

[ModE98]

How will the death of Steve Jobs today affect AAPL? Temporary set back?
Sad, a visionary genius lost at young age of 56.