Daily Archives: March 15, 2007

Cramer’s SELL BLOCK All on Technology

On tonights MAD MONEY on CNBC, Jim Cramer did his SELL BLOCK and dedicated the entire segment to saying to sell technology and not look at it until later in the year.  He said analysts that keep trying to call for a bottom in technology stocks are just wrong.  Cramer said that warming up to Oracle (ORCL) just because it is selling off is just wrong.  He thinks the ORCL buyout of Hyperion just shows it needs other avenues.  He even said that despite him liking Microsoft (MSFT), it has been a terrible bust and is down big as Vista hasn’t been living up to expectations.  He doesn’t like Seagate (STX), Western Digital (WDC) or Komag (KOMG) in the drive space.  He doesn’t like IBM (IBM) with Palmisano at the helm.  He doesn’t like Network Appliance (NTAP) either.  On Micron (MU) Cramer doesn’t like yesterday’s analyst upgrade on inventory correction bottoming out being good for it.  Cramer said Texas Instruments (TXN) isnt good; he panned Intel (INTC) and Really panned AMD (AMD) as not needing to exist.  On semiconductor equipment names, Cramer said KLA (KLAC) and others won’t do well until the actual chip companies.

IAC/Interactive (IACI) is one he likes but he is cautious on the WSJ tie-up.  Google (GOOG) is he thinks that has bottomed but it won’t go up immediately.

He did say some Postive things on a few stocks.  He thinks Qualcomm (QCOM) is good and could go to $45.00 in a hurry; He was also positive on Cisco (CSCO), Apple (AAPL), Akamai (AKAM), Garmin (GRMN) and Hewlett-Packard (HPQ).  He had also been positive on Level 3 (LVLT) earlier.

Jon C. Ogg
March 15, 2007

Posted on: March 15, 2007 – 5:56 pm in Cramer, Internet, Semiconductor, Technology Companies

Cramer’s Non-Pharma Healthcare Pick

On tonight’s MAD MONEY on CNBC, Jim Cramer said he has a defensive play that will cover you in a couple places.  Cramer was resuming his non-pharmaceutical healthcare stock sector.  He wants to review the drug-coated stents and the pick he has is Volcano Corp (VOLC).  He doesn’t really want you to buy it until next week.  As of the market close it had a $625 million market cap; it makes intraveneous catheters that allow for exploration of arteries in place of angiograms.  Because of the problems with drug coated stents the doctors are needing to look closer at arteries inside rather than using imaging.

On a call-in, Cramer was asked about Syneron (ELOS-NASDAQ).  Cramer likes the P&G (PG) deal with the company.  He liked it lower and then said to sell it, but he likes it again at lower prices.  In another call-in, he was asked about Stereotaxis (STXS) on how much competition it could really give Hansen Medical and Cramer didn’t think it would be that much.

Jon C. Ogg
March 15, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: March 15, 2007 – 5:26 pm in Cramer

Another Defensive Stock From Cramer

On tonight’s MAD MONEY on CNBC, Jim Cramer said he has a defensive play that will cover you in a couple places.  Cramer thinks that the buybacks are helping and he likes the non-paharmaceutical healthcare sector because they are doing well.  Cramer likes Cigna (CI-NYSE).  He didn’t like it before, but the managed care company is a cross between a financial company and a health containment cost play.  At $13.6 Billion company, they bought $931 million in stock and it is virtually taking itself private because of how fast it is buying shares down.  It bought more than 20% of its shares since 2004.  It is too cheap because of its discount to its growth rate.  He thinks that it doesn’t even need to be public because they don’t need capital.

Jon C. Ogg
March 15, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: March 15, 2007 – 5:11 pm in Cramer

S&P Downgrades Washington Mutual & iRobot

Washington Mutual (WM) Cut to Sell from Hold (3 star to 2 star)
S&P is concerned about Washington Mutual’s exposure to the subprime market; believes the company will need to add more to reserves than expected. Roughly 9% of Washington Mutual’s loans held are subprime, with a large portion having loan-to value ratios over 80%. Roughly 28% of its loan portfolio is comprised of Option Arms it thinks have not yet been stress-tested. It LOWERED 2007 EPS estimate by $0.28 to $3.68; & CUT 12-month target price by $11.00 down to $37.00; that is 10-times 2007 EPS estimate, below historical levels to reflect a difficult mortgage environment.

iRobot (IRBT) Cut to Sell from Hold (3 star to 2 star)
iRobot is likely to face pressure on home robot sales, 60% of the 2006 total, as a housing industry slowdown projected to last into 2008 pinches consumer discretionary spending. It also faces a seasonally slow sales period and high project development costs in first half of 2007. On the bright side, the German military ordered more PackBot bomb-disposal robots on March 7.  S&P is RAISING EPS estimate for 2007 to $0.08 from $0.01, but CUTTING 2008’s to $0.30 from $0.65. Based on S&P price-to-book analysis, it CUT IRBT target price to $11.00 from $18.00.

Jon C. Ogg
March 15, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: March 15, 2007 – 4:44 pm in Analyst Calls

StreetInsider.com Trading Radar 03/16

CPI and Core CPI are expected at 8:30AM ET with economists looking for 0.3% and 0.2%, respectively.

Industrial Production is expected at 9:15AM ET with economists looking for 0.3%

Capacity Utilization is expected at 9:15AM ET with economists looking for 81.3%

AnnTaylor (NYSE: ANN) is expected to report results before the open Friday with analysts looking for EPS of $0.29 and revenues of $610.78 million.

Carnival (NYSE: CCL) is expected to report results before the open Friday with analysts looking for EPS of $0.34 and revenues of $2.64 billion.

Imax (Nasdaq: IMAX) is expected to report results before the open Friday with analysts looking for a loss of $0.07 and revenues of $32.08 million.

University of Michigan Consumer Sentiment Index (March Prel.) is expected at 10AM ET with economists looking for 89

Medifast (AMEX: MED) is expected to report results after the close Friday with analysts looking for EPS of $0.15 and revenues of $14.2 million.

http://www.streetinsider.com

Posted on: March 15, 2007 – 4:07 pm in Market Close

Great Companies Don’t Always Make Great Stocks

By Chad Brand of Peridot Capitalist

Many times one will look at a value investor’s portfolio and wonder why on earth they own some of the stocks they do. Usually the answer lies in the fact that the manager understands that just because a firm isn’t considered to be a great company, it could very well be a great stock going forward. Stock market investing is about buying a share for less than it will ultimately be worth in the future. It is not about buying stocks of great companies and waiting for the cash to roll in. If the stock isn’t cheap, it won’t outperform consistently over the long term.

I think this is one of the reasons why sell-side analysts tend to be very poor stock pickers. More often than not, they don’t want to have a "sell" rating on Best Buy (BBY) and a "buy" on RadioShack (RSH), for instance. The average person will look at that dichotomy and laugh. They might even ask, based on their shopping preferences, "How can RadioShack be a better stock than Best Buy?"

Well, looking at a 1-year chart of the two, we can see who would have been right:

Bbyrsh_2

The reason I bring this up is because of an article I read in the March 5th issue of Fortune. It talked about the performance of America’s most admired companies versus the least admired. When I see the term "most admired" I equate that to what many investors consider a "great company," a so-called blue chip.

Accordingly, the results of the study cited in the article weren’t surprising to a value investor like myself. The mean annualized return from 1983 through 2006 was +17.8% per year for the least admired, versus just +15.4% for the most admired.

Why was this the case? Because stocks trade based on valuation over long periods of time, not according to the underlying company’s popularity or brand name. In fact, the article also cited the average price-to-book ratios of the two groups of stocks being examined. Most admired: 2.07 times book value. Least admired: 1.27 times book value. Hence, the outperformance over a 23 year period of time.

Full Disclosure: Long shares of RSH at time of writing

http://www.peridotcapitalist.com/

Posted on: March 15, 2007 – 3:44 pm in Research

Clinton Group Expresses Disappointment with Lenox (LNX), Wants to Help With Turnaround

From 13D Tracker

In an amended 13D filing on Lenox Group Inc. (NYSE: LNX), Clinton Group showed they bumped their stake in the company to 10.9% from 9.6%. The firm also disclosed a letter to the board of directors citing shareholder disappointment with previous management and the board’s performance in guiding the company.

The firm urged the company to consult shareholders on, modification of the engagement of Carl Marks Advisory Group; offers of employment for senior management positions; capital structure and financing issues; and strategic transactions.

The firm said it would welcome an opportunity to help facilitate the company’s turnaround and exploration of strategic ideas by providing three director candidates for shareholder consideration.

Read More »

Posted on: March 15, 2007 – 3:27 pm in SEC

The Housing Woes hits America where it hurts the worst

From The Stock Masters

For the most part Americans who had every intention of paying off their mortgages and living in their houses now just can’t swing it. Obi-Won - The OriginalThe vicious cycle of falling property values and falling employment levels, falling population – it is making for a very painful mix. The Midwest has endured more of its share of economic distress and home prices haven’t been robust, which by extension makes those subprime mortgages extremely vulnerable. The hardship is just getting started and middle America is going to get hit hard. If Princess Leia was living in Detroit you can bet her answering machine would be saying "Help me, Obi-Wan Kenobi; you’re my only hope." Read story at Yahoo News…

http://www.thestockmasters.com/index.asp

Posted on: March 15, 2007 – 3:24 pm in Housing

The 52-Week Low Club

Hancock Farbics (HKF) Financial results delayed and CFO is now leaving. Drops to $1.55 down from 52-week high of $4.36.

The Progressive Corporation (PGR) Insurance company still slipping after posting poor February figures. Drops to $20.91 frm 12-month high of $27.86.

McClatchy (MNI) "May I have another, please, sir". Newspaper company back as news hits that industry advertising fell sharply in 2006. Down to $33.94 from 52-week high of $51.53.

Fiberstars (FBST) Fiber optic lighting company has poor fourth quarter and a downgrade. Slips to $5.32 from 52-week high of $9.25.

Emisphere Tech (EMIS) Biopharma company gets a "going concern" letter from its accountants. Moves down to $3.11. The 52-week high is $11.40.

Audiocodes (AUDC) Still falling after cutting Q1 guidance. Drops to $6.80 from 52-week high of $14.64.

Penwest Pharma (PPCO) Stock still moving down after poor quarter. $10.02 from 52-week high of $23.10.

Private Media (PRVT) Porno content company continues its fall. Down to $2.01 from 52-week high of $4.87.

Douglas A. McIntyre

Posted on: March 15, 2007 – 3:06 pm in HI/LOW

Analyzing Impacts of a Google Phone

Everyone loves talking about Google (GOOG).  It has almost become the national sport.  So it is no wonder that the discussions are pointing again toward a Google phone of some sort.  There has been increased speculation stirring up again that Google is going to be creating a phone of its own, but opinions and thoughts on this are as varied as the potential consequences. 

Google has just increased its Google Talk abilities through R-I-M (RIMM) PDA’s and other devices, so who knows.  Almost all phones on the market now that have mobile web search capabilities already allow a Google Search to be conducted.  But they also allow other searches to be conducted as well.  There was a time before that it was speculated that Google was going to get into the PC-space, but it turned out that Google determined it could build its own machines for its own employees and came out and said it did not want to get into the hardware space.  Companies change and there have been some recent comments that would back this up, but the WHO WHAT WHEN WHERE WHY & HOW scenarios on this are too much to calculate. 

Maybe they just license out the name.  Maybe they partner (Samsung already noted) with a manufacturer.  It would still be puzzling as to if Google would really want to go out and spend the necessary development funds on working out the logistics and innards of creating an actual phone of its own.  We’ll probably already know more by the weekend so stay tuned on this one.  We included some outside comments and links from sources we believe are not up anything besides covering the story.

CNBC’s Jim Goldman made note of this earlier and you can watch their video on this.

Gizmodo discussed the possibilities of this as well.

CEO Eric Schmidt has already said that he believes mobile phones should be free and that subsidies should increase.

Engadget just speculated on this last week.

GigaOM’s Om Malik already speculated on this back on December 17.

Another post from Simeons just showed some details on this last week as well.

Even CNET covered this and referred to Simeons.

One would also have to wonder if the company went into this space how other phone makers AND/OR carriers would treat the company if it went into the space and was started to be deemed as a competitor.  Apple hasn’t even gotten its iPhone out on the market yet and the space already has many leaders.  Nokia (NOK), Ericsson (ERIS), Motorola (MOT), Samsung, Palm (PALM), R-I-M (RIMM) would likely take some offensive and partner exclusively elsewhere if Google was going to be taking sales away from them rather than partnering with them on the content side.  Imagine if the carriers like Verizon (VZ), Sprint Nextel (S), Cingular (T), and others were all suddenly under seige. 

Google would likely do a more amicable integration than something outright competitive because phone makers or carriers would likely drop their friendly stance if this was going to bite into their revenue and income.  In the end, we won’t know about this until Google wants us to know or until the imminent release is leaked out.  You can say some of the reports already show pictures, point to executive discussions, and make many inferences on this.  Until there is something more concrete this is what lawyers would call "hearsay."

Jon C. Ogg
March 15, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: March 15, 2007 – 3:00 pm in Internet, Software, Technology Companies, Telecom, Wireless

Cramer Defends Lenders & Has Two Buyout Speculations

On today’s STOP TRADING segment on CNBC, Jim Cramer discussed Thuornburg Mortgage (TMA) and he said that the CEO is great and the shorts who are targeting him are wrong.  CRamer even said that the brokerage stocks are making money on subprime. 

On Dow Chemical (DOW) up almost 6%, Cramer is pointing to the buyout speculation.  He noted this just recently too.  He thinks that Alcoa (AA) will not be public in a year.  Here is his summary on these from two days ago with the supporting thoughts he gave.

Jon C. Ogg
March 15, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: March 15, 2007 – 1:51 pm in Cramer

Could Gateway Buyout Rumors Be True?

Forbes has run an article noting than an Asian PC-maker is rumored to be buying Gateway (GTW-NYSE).  We recently ran a piece noting how difficult it would be to actually turn Gateway back around, and that will hold true if it is an Asian PC-maker doing the acquiring.  The rumored names are Acer and Lenovo, and if you go sneak around chat rooms you can probably come up with a half-dozen other companies whose names you could throw into the hat.  It would be hard for an American, European, African, or even a Martian PC-maker to turn around.  That doesn’t mean it can’t happen, because we have noted time after time in so many different industries that beauty is truly in the eye of the beholder.  To show both sides of the coin, there was a portfolio manager that recently said on CNBC with some conviction that GTW could go up to $5.00, and some Wall Street analysts have price targets above today’s $2.25 price.

There is one single saving grace here, and that is that the company does actually trade at a very cheap price-to-sales basis.  The reason for that is because they have proven that they are just not that profitable.  They would also more likely than not get to kiss away the US government business that may be one of the few areas where it can still save itself on its own.  Gateway is also about a year away from having that Microsoft-subsidy ending.

If there was much truth to the rumors the shares would probably be trading higher than $2.25 today.  What price would have to be paid in order to secure a buyout?  It would have to be substantially higher than today, even if the holders worries that the faced the company going to zero without a savior of a deal.  There are so many shareholders buried that we deem as "Long & Wrong" that would be fighting for a much higher price and it has been so much higher in the past that it is really not quantifiable on a cursory review to say what price it would actually take to get an approval from more than half of the holders.  Gateway still has some anti-takeover provisions left, although not as many as they used to have in place.

Regardless of where the buyer may or may not be, they would still be inheriting a shrinking company and a company that is challenged.  They would also be coming on to the US turf right at the time that Dell (DELL) is trying to revamp and turn their ship around.  They would also be acquiring a company whose liquid and hard assets barely pare off with all the liabilities in the company.  The good news is that they would be taking on the eMachines unit that still has some value, so it isn’t as though we don’t see anything else that can be shown as good news.

So how much would it take?  The company has a $836 Million market cap and carries $1.3+ Billion in liabilities.  Would it take $2 Billion to buy it?  Maybe, but who knows for sure.  If we had our own $2 Billion to make buyouts, we’d certainly be looking elsewhere instead of here.  It is still possible that someone wants it.  If so we would ask why the stock is not up much higher even though it is up in the last 5-days.  This certainly isn’t meant as a damnation to Gateway because it would be nice to see it turn around.  I am just personally glad it isn’t my job to fix Gateway, and I wouldn’t be committing the required capital to do the acquisition if it was choosing this one or others.

Jon C. Ogg
March 15, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: March 15, 2007 – 1:24 pm in Consumer Electronics, Mergers and Buy Outs, PC Companies, Rumors, Technology Companies

Comments From The Stock Masters 3/15/07

Imax Corp. (IMAX) reports earnings tomorrow and with shares trading toward the lower end of its 52-week range, investors are waiting for any type of good news.
300 MOVIEIMAX is currently showing the movie 300 and over the weekend it set a record $3.6M in ticket sales at 62 Imax theaters. With just about every male in America dying to see this movie, expect Imax to keep raking in the cash. Kudos to Frank Miller for a killer graphic novel that made an incredible jump to the big screen. If you haven’t seen it, you have to, it’s unbelievable.
But besides the 300, what else does Imax have going for itself?
On Monday shares of IMAX jumped 5.2% to $4.86 after they announced that Dickinson Theatres Inc. has agreed to open five Imax theaters in new multiplexes in the Midwest. Imax didn’t disclose how much the deal was worth but said "it’s the company’s largest lease agreement since 2004." Imax also reported that Regal Cinemas Inc. will install two Imax MPX theater systems at multiplexes in California and Oregon in the next two months. It’s been a tough run for IMAX over the last year, they failed to ever find a buyer after putting the company up for sale and their share price has fallen with the lack of performance by the company. Should tomorrow’s call provide an improved guidance or a better than expected quarter, shares of IMAX will be off to the races. If you think IMAX has the right stuff, it’s time to throw down, however with the stock trading so low, its best to sit back and watch. IMAX shares have a long way to go before they hit a new 52-week high, so if Imax is a turnaround story, you’ve got time to play it.

http://www.thestockmasters.com/index.asp

Posted on: March 15, 2007 – 12:40 pm in Research

StreetInsider.com Unusual 11 Mid-Day Movers 03/15/2007

MapInfo NASDAQ: MAPS) 50.8% HIGHER; Pitney Bowes Inc. (NYSE: PBI) entered into a merger agreement to acquire MapInfo for approximately $408 million in cash, net of expected cash on MapInfo’s balance sheet at the time of closing. MapInfo is the leading global provider of location intelligence solutions. In the next seven business days, Pitney Bowes will commence a tender offer at a price of $20.25 per share in cash for the outstanding common shares of MapInfo.

Accredited Home Lenders (NASDAQ: LEND) 50.6% HIGHER; Continued momentum after yesterday’s 52% gain. The stock has plummeted recently on sub-prime woes.

Novastar Financial Inc. (NYSE: NFI) 24.6% HIGHER; Stock continues to rebound after recent sub-prime debacle. (NOTE – NFI has still fallen over 70% since Feb. 1, 2007)

WebEx (Nasdaq: WEBX) 22.3% HIGHER; Cisco (Nasdaq: CSCO) to acquire WebEx for $57 per share and will assume outstanding share-based awards, for an aggregate purchase price of approximately $3.2 billion, or approximately $2.9 billion net of WebEx’s existing cash balance.

eOn Communications (Nasdaq: EONC) 20.7% LOWER; Reports a Q2 loss of $0.07 compared to a $0.05 profit for the same period last year. Revenues were $1.49 million compared to $2.96 million for the same period last year. "Obviously we are disappointed with the results for the quarter. Revenue was significantly impacted by delays experienced in new product introductions, a continued slow ramp up in sales coming from our China initiatives and seasonal buying patterns of our large US government and education market segments," stated David Lee, eOn’s chairman and chief executive officer.

Pep Boys (NYSE: PBY) 15.4% HIGHER; Reports a Q4 earnings of $0.15 per share, which may not compare to the consensus of a $0.12 loss. Revenues were $586.1 million vs. $554.24 million consensus.

CBOT Holdings (NYSE: BOT) 13.7% HIGHER; IntercontinentalExchange (NYSE: ICE) made a proposal to the Board of Directors of CBOT Holdings, Inc. to combine the two companies in a stock- for-stock transaction that would create theworld’s most comprehensive derivatives exchange. ICE would issue 1.42 ICE shares for each CBOT Class A common share, valued at $187.34 per CBOT share based on yesterday’s closing price of ICE shares.

Bradley Pharmaceuticals Inc. (NYSE: BDY) 12.2% LOWER; Reported Q4 results

Winnebago Industries (NYSE: WGO) 10.5% HIGHER; Reports Q2 earnings of $0.24 per share, 1 cent better than estimates. Revenues came $199 million vs the $196.8 million.

USANA Health Sciences Inc. (Nasdaq: USNA) 8.5% LOWER; Stock getting hit after negative WSJ article.

IntercontinentalExchange (NYSE: ICE) 3.3% LOWER; Made proposal to acquire CBOT Holdings.

http://www.streetinsider.com/

Posted on: March 15, 2007 – 12:38 pm in Research

Cramer Talks Brokers

On today’s Wall Street Confidential video on TheStreet.com, Cramer unsurprisingly talked about the brokerage firm stocks now that all three reports in the group are out for the week.  He also reviewed the huge jump in the lending stocks.

On the brokerage stocks he likes Goldman Sachs (GS) and thinks it isgoing to $250.00 fast and that is his favorite name in the group.  Hethinks Bear Stearns (BSC) is #2 in the and Lehman is #3  The onenegative name that Cramer gave in the group is Merril Lynch (MER). 

The number of buyers in the past that were willing to buy defaulted loans was huge, and that is what Bear Stearns is doing.  In Accredited (LEND) and these Indymac (NDE) are all bouncing on short coverings.  Cramer noted that Thornberg (TMA) is a good company as is Indymac (NDE) and he is inclined to be long those, but not on all of the ones that are up just on short covering. 

He doesn’t think the homebuilders have been smart here.

Jon C. Ogg
March 15, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: March 15, 2007 – 11:43 am in Brokerage Firms, Cramer, Financial Stocks

Cisco Buys Webex, But Does The Software Work?

The news is already everywhere that Cisco (CSCO) is buying web videoconferencing company Webex (WEBX) for $3.2 billion. Webex shares are up 22% to  $56.50 on the news.

But, how good is the Webex technology? Webex is not really growing very fast for a successful company. Revenue in 2006 was $380 million compared to $308 million in 2005. Net income was down slightly to $48.6 million from $53 million in 2005.

TechCrunch makes the observation that Webex software is "expensive and bulky". The tech news site also points out that Webex has a number of competitors, many with better products.

Cisco is paying a big multiple for a company that may not have the best products in its field.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Posted on: March 15, 2007 – 11:07 am in Mergers and Buy Outs

Attention Web 2.0 Start-Ups: Party May Be Ending

From Internet Outsider

Market_crash Who says Wall Street firms are always bullish?  According to Reuters, Merrill Lynch published a report today suggesting that housing market woes could drag the economy into a recession and that, if it does, investors can expect a drop in the S&P 500 of at least 30% from the peak.  Even if there is no recession, and the market just does a head-fake, we should expect a drop of about 20%.

How will a public-market stumble affect Web 2.0 start-ups?  The same way the market crash in the fall of 2000 did, albeit to a lesser extent:

  • Money will get harder to raise.  (Because VCs will be feeling pressure from their clients, and exit valuations will be lower).
  • Financing and exit valuations will be lower.  Because the stocks of acquirers and comparably public-market companies will be lower.
  • Investors will get impatient for start-ups to develop businesses instead of "products" and "communities."

  • The growth rate of online advertising will slow dramatically.  In tough times, advertising is one of the first expense lines to get cut (by big businesses and small).  What’s more, some start-ups that are currently buying advertising will cut back or cease to exist. 

In short, being a Web 2.0 entrepreneur or employee may soon get more difficult and less fun.  Hit the bids while you can!

Posted by Henry Blodget on March 15, 2007

http://www.internetoutsider.com/

Posted on: March 15, 2007 – 10:55 am in Internet

Viacom vs. Google: Who’s The Daddy?

From Internet Outsider

Puppet The key question in the Viacom v. GooTube war is who-needs-whom more?  The best way to answer this question is to study the percentage of "views" on YouTube that consist of Viacom (and other big media) content.  If the percentage is low, Viacom’s hardball tactics will fail.  If the percentage is high, Google will probably have to make some major concessions. 

Importantly, the critical fact here is not the percentage of clips posted, but the percentage of clips viewed.  If Big Media content accounts for only 5% of the clips, but 95% of the views, then Google will need to have its attitude adjusted. 

The first data point suggesting that Big Media content does NOT account for anywhere near this percentage of views is that the folks at Google know exactly what the numbers are..and they are not morons.  If YouTube really needed Viacom’s content, the GooTube folks would presumably be down in LA sucking up to Sumner and his fish.  Instead, they’re acting the way someone holding a full-house does when bullied by a guy with three-of-a-kind.  (And remember: Google knows exactly what hand Viacom is holding; Viacom, meanwhile, is just guessing).  Is Google bluffing?  Could be.  But I think this is unlikely.

Second, Google has already struck distribution deals with several other big media companies and hundreds of small ones.  Big Media’s best chance to create a command-and-control Internet media economy is to unite.  But Google has already done an excellent job of fragmenting the opposition.

Third, although I haven’t yet seen detailed YouTube stream data (again, I’d be grateful if someone would pass it along), at least one external data source suggests that the Big Media percentage of online video views is nowhere near as high as many observers think.  A company called VidMeter tracks the top videos across all the top sites, and presents the results on both a "daily" and "all time" basis.  Based on a quick analysis of the top-200 all-time videos, I think it’s likely that Viacom’s content may actually represent a very small percentage of YouTube clips viewed.

One problem with such analyses (and with online video clips in general) is that it’s often difficult to tell who owns the copyright of a particular clip, and because I don’t spend much time getting familiar with Viacom content, I may be under-counting.  So let me say up front that my count is very much a back-of-the-envelope estimate and that, for all I know, VidMeter’s methodology and counts are wildly inaccurate.  Please feel free to peruse the list yourself and weigh in.

VidMeter’s Top 200 all-time videos range from the "Evolution of Dance," which has been viewed 54 million times, to an Anna Nicole Smith clip viewed 3 million times.  Of these Top 200, I did not see so much as a single clip that I was certain was Viacom content.  (The only Jon Stewart clip in the top 200 was his appearance on Crossfire, which I assume is Time Warner content). 

I saw plenty of music videos and movie trailers, which I hope the copyright owners aren’t dumb enough to lock behind a license agreement, and I saw plenty of talking cats, lonelygirl-wannabes, and other predictable stuff.  I saw some FOX clips.  I saw a lot of mash-ups, which I assume (hope) are legal.  I saw a lot of stuff that obviously originated on TV and may or may not be licensed.   In short, I’m sure there’s some Viacom content on that list, but if so, it didn’t jump out at me.   

The upshot?  Based on a scan of the VidMeter list, I see nothing to change my opinion that, in this negotiation, Google is the Daddy.   

Thanks to Niki Scevak of Homethinking for suggesting Vidmeter.

Posted by Henry Blodget on March 15, 2007

http://www.internetoutsider.com/

Posted on: March 15, 2007 – 10:52 am in Media

Will the “Value Effect” and “Size Effect” Persist? Do They Even Exist?

From Investment Intelligencer

FightIn my "dumbest column of the year" post, I suggested that DFA and other smart investors have capitalized on the "value effect" to design better passive funds.  Astute readers pointed out that the value effect is a theory, not a fact, and that it might soon disappear–leaving those who bought "value tilted" or "fundmental-index" funds holding an underperforming bag.

This is a complex topic, one that still produces violent arguments in the halls of academia and elsewhere.  Fama, French, DFA, and others believe the superior long-term performance of value and small stocks over large growth stocks reflects their higher risks: stocks get cheap because the companies are in distress (or riskier), and rational investors demand a higher return.  If this view is correct, the effects should persist over the long term, even if they disappears for decades at a time.

One contrary view, held by John Bogle and others, is that the value effect is merely a short-term trend that, like other such trends, will eventually become over-bought–and then disappear.  Having "discovered" that value stocks outperform growth stocks, this theory goes, investors will bid up the prices of value stocks, and this will reduce or eliminate any future higher returns (or, more pertinently, result in lower future returns relative to growth stocks). 

Common sense and analyses of past data suggest that the latter view–temporary phenomenon–is certainly valid over periods that most investors consider long-term: 1-5 years.  Other analyses, however, show that the value effect has, on average, been persistent over many decades and in many markets, validating the former theory, too.  The same can be said for the size effect.

In the coming weeks, I will assemble some of the most important work on this topic (and please feel free to weigh in with studies, thoughts, and comments, either in the comments section or via email).  For today, however, I will simply highlight some excellent charts produced by Index Funds Advisors.  These charts show the frequency with which small and value stocks have outperformed large and growth stocks (scroll down to the bar charts, Figs 9-9 through 9-16), as well as the relative performance of small vs. large over selected time periods (Fig 9-17).  The charts show that:

  • Small value outperformed large growth in 58% of 1-year periods from 1927 to 2006.
  • Small value outperformed large growth in 97% of 20-year periods over the same 80 years.
  • Large value outperformed large growth in 58% of 1-year periods and 92% of 20-year periods.
  • The "size effect" showed perfect decile by decile performance correlation over 80 years (smallest 10% outperform second-smallest 10%, etc.)  Over shorter–but still long–periods, however, this performance has completely reversed.
  • From 1965-1968, 1975-1983, 1992-1993, and 2002-2006, the smallest 10% of stocks wildly outperformed the largest 10%.
  • In all the interim periods, small stocks got absolutely crushed.

These charts illustrate why both camps in the "persistent" versus "temporary" camp have an important point.  Over the truly long-term (80 years), the value and small effects appear to be undeniable.  Over interim periods long enough to feel like eternity, however, small and value stocks get overextended and experienced painful reversion to (and beyond) the mean.

Should investors try to take advantage of either pattern? Both?  Should investors "tilt" portfolios toward value and small, but also try to time the mean-reversion by changing portfolio weights?  The latter would depend on whether the mean-reversion can be meaningfully predicted.  And that’s a topic for another day…

Posted by Henry Blodget on March 15, 2007

http://www.investmentintelligencer.com/

Posted on: March 15, 2007 – 10:50 am in Research

BSC Historical Earnings

From Ticker Sense

Bear Stearns (BSC) beat earnings estimates yet again.  They did, however, only beat by 2 cents per share, which is the smallest spread since their 1-cent beat in September 2002.  Below we highlight BSC’s historical earnings reports going back to the start of the bull market and also include the stock’s price performance on the day of the report.  The stock is currently trading up about 15 cents.

Bsc315

http://www.tickersense.typepad.com/

Posted on: March 15, 2007 – 10:48 am in Financial Stocks