Overlords Investment Conclave [OIC] Recruitment Thread

[noxiousdog]

I passed on AAPL at $85 around December. I had the same feelings about it being overvalued as you do.

And yes, it is their brand lets the stock have a 33 P/E multiple. It's the fact that any new product they introduce will have the same brand power that the iPod does. The iPhone, appleTV, Leopard or whatever the next O/S is. I'm no fan of their products and I don't own any of their stock. But I'm fairly convinced that their brand name, public perception, growth prospects, and legions of fans will continue to justify the high multiple. The strongest of those being their growth prospects. Investors salivate at growth and see Apple as someone who could introduce a white plastic coated turd and sell it. Because of that, the price will continue to go up. I hate the company. I respect the stock.

As for the growth numbers, I'm not sure what you're talking about. QoQ I see sales at $5.2B Q207 v $4.3B Q206. That's roughly $900M over one quarter, so what, 20% rev growth? EPS QoQ is like 80%. That's the growth that's getting a 33 P/E. Not 5M in sales YoY (were you talking about units?).

Quickly, from S&P for AAPL EPS:
2007 $3.58E
2006 $2.27
2005 $1.56
2004 $0.36

Their 1st quarter numbers are inflated by Christmas. Look at YoY.

[LawBeefaroni]

I passed on AAPL at $85 around December. I had the same feelings about it being overvalued as you do.

And yes, it is their brand lets the stock have a 33 P/E multiple. It's the fact that any new product they introduce will have the same brand power that the iPod does. The iPhone, appleTV, Leopard or whatever the next O/S is. I'm no fan of their products and I don't own any of their stock. But I'm fairly convinced that their brand name, public perception, growth prospects, and legions of fans will continue to justify the high multiple. The strongest of those being their growth prospects. Investors salivate at growth and see Apple as someone who could introduce a white plastic coated turd and sell it. Because of that, the price will continue to go up. I hate the company. I respect the stock.

As for the growth numbers, I'm not sure what you're talking about. QoQ I see sales at $5.2B Q207 v $4.3B Q206. That's roughly $900M over one quarter, so what, 20% rev growth? EPS QoQ is like 80%. That's the growth that's getting a 33 P/E. Not 5M in sales YoY (were you talking about units?).

Quickly, from S&P for AAPL EPS:
2007 $3.58E
2006 $2.27
2005 $1.56
2004 $0.36

Their 1st quarter numbers are inflated by Christmas. Look at YoY.

The EPS numbers above are YoY. Quarter numbers were Q2.

But OK, here are yearly revs:
Revenue (S&P):
2006 $19.312B
2005 $13.931B
2004 $8.279B

That's $5.381B from 2005 to 2006. B, not M. A 38% increase.

AAPL's PEG is extremely low. P/E of 33 is somewhat justified in my opinion. Again, that's coming from someone who doesn't like Apple.

[noxiousdog]

The EPS numbers above are YoY. Quarter numbers were Q2.

But OK, here are yearly revs:
Revenue (S&P):
2006 $19.312B
2005 $13.931B
2004 $8.279B

That's $5.381B from 2005 to 2006. B, not M. A 38% increase.

AAPL's PEG is extremely low. P/E of 33 is somewhat justified in my opinion. Again, that's coming from someone who doesn't like Apple.

Right.

13.931B - 8.279B = 5.652
19.312B - 13.931B = 5.381

In other words, their growth is already slowing on a nominal basis, let alone a percentage basis. While they can leverage their brand name to expand their margins now, I'm not sure they will be able to do it going forward. As more companies go to the open source format, you'll no longer be able to force people onto ipods and Itunes.

[Carpet_pissr]

fwiw both M* and Zacks have AAPL at being overvalued presently.

Fair value for M* is $91, with a "consider selling" at $114.

Zack's is much more short term (6 months out tops) and is rating it a HOLD with a target price of $114.50

PEG is 1.5, which is not bad, but not great.

Of course, if you look at the longer term chart, it just keep going up, up up, so this may be a case of a company that ALWAYS looks expensive.

ISRG (Intuitive Surgical) is one that I hold like that. Always seems overpriced, but it manages to keep making new highs.

[LawBeefaroni]

5.5M from 04->05 and 5.4M from 05->06. So on a percentage basis, their growth is significantly tailing off.

Just to clarify, this was billions then, right?

In other words, their growth is already slowing on a nominal basis, let alone a percentage basis. While they can leverage their brand name to expand their margins now, I'm not sure they will be able to do it going forward. As more companies go to the open source format, you'll no longer be able to force people onto ipods and Itunes.

Their margins are increasing and not just from leveraging the brand name. iTunes is a huge margin business. The cost of iPods continues to come down as does the cost of developing new models yet the price does not. Margins are expanding. The iPhone is already priced at what, $500?

There are plenty of open source alternatives already available and it hasn't hurt iPod or iTunes (to my continued astonishment).

We don't disagree that there's an AAPL bubble, I just see it as long term. There are plenty of events/news coming to keep it propped up.

[LawBeefaroni]

Might be a choppy day. Rough open but if recent history is any indicator, the DJIA will finish green.

Did I say green? I meant up 110+.

Whew.

POT ran like hell.

[noxiousdog]

PEG is meaningless to a company like apple and PE is only useful as a measure of what it might look like in 4 years.

IE, at 60B of revenue (32% YoY projected, last year was 25%) and 20% margins, a P/E of 20 (864 shares oustanding) would give you a 2011 price target of 277. All three of which I think are optomistic at best, but if that happens, you've got yourself a very nice return. (25%/year). P/E would not fall to 20 if they are having 33% growth years but lets use that as our margin of safety. It's easy enough to increase our price target 25% or 50% if we want ot move PE to 25 or 30 to suit your own belief.

However, at 40B of revenue (5B YoY), and 15% margins (last quarter 12.9%), and a P/E of 20 gives you a price target of 138. Uh. yuck. You can get a better return on CDs.

[Sunderer]

cpnlq.pk

picked it up today at $3.65

[noxiousdog]

5.5M from 04->05 and 5.4M from 05->06. So on a percentage basis, their growth is significantly tailing off.

Just to clarify, this was billions then, right?

Oh yes. My bad.

Their margins are increasing and not just from leveraging the brand name. iTunes is a huge margin business. The cost of iPods continues to come down as does the cost of developing new models yet the price does not. Margins are expanding. The iPhone is already priced at what, $500?

they are increasing, but the computer business is still big for them from a revenue number. That puts a drag on overall net margin.

To be fair, we should split out the mac business, the Itune business, and the iPod business if we wanted to go into deep detail.

There are plenty of open source alternatives already available and it hasn't hurt iPod or iTunes (to my continued astonishment).

We'll see. This DRM shift is huge. I'll be very interested to see AAPL's next 10-K.

We don't disagree that there's an AAPL bubble, I just see it as long term. There are plenty of events/news coming to keep it propped up.

What's long term? For example, I'm not adverse to all high PE stocks. Google doesn't phase me in the least. The difference is that while their % growth is slowing, their nominal growth is increasing which can justify a high PE. Apple's nominal growth is slowing, and can Apple capture 80 billion worth of the Itunes/Pod market by 2011? I find that to be highly unlikely.

Also, Apple's past scares me as well. Of the last 10 years, they've been in the red twice, and had EPS under $0.10 another 3 years. Their management (and I know that Jobs' Apple isn't the same management) doesn't have a very good track record as fads fade.

[LawBeefaroni]

There are plenty of open source alternatives already available and it hasn't hurt iPod or iTunes (to my continued astonishment).

We'll see. This DRM shift is huge. I'll be very interested to see AAPL's next 10-K.

Ugh, this is killing me. I don't like Apple or Jobs. But Jobs has publicly come out against DRM and his pal Bezos and Amazon have announced DRM free MP3 downloads. I see something happening there.

What's long term? For example, I'm not adverse to all high PE stocks. Google doesn't phase me in the least. The difference is that while their % growth is slowing, their nominal growth is increasing which can justify a high PE. Apple's nominal growth is slowing, and can Apple capture 80 billion worth of the Itunes/Pod market by 2011? I find that to be highly unlikely.

For me, long term is a year or so. I don't like to try and see the future much beyond that. Sure, it's a hot potato. But for the time being the PPS will make you money.

cpnlq.pk

picked it up today at $3.65

Pinkies.

500 million float, debt, bankruptcy...

Be careful.

I'm setting up a Zecco account for pinks/otc. I'll consider it my sports betting replacement account.

[noxiousdog]

For me, long term is a year or so. I don't like to try and see the future much beyond that. Sure, it's a hot potato. But for the time being the PPS will make you money.

heh. Different philosophies.

[LawBeefaroni]

For me, long term is a year or so. I don't like to try and see the future much beyond that. Sure, it's a hot potato. But for the time being the PPS will make you money.

heh. Different philosophies.

When I hit +12% I put in a trailing stop for anything but the bluest of the blue. I've learned a few things in the past year and one of them is that I'm a pig.

[noxiousdog]

For me, long term is a year or so. I don't like to try and see the future much beyond that. Sure, it's a hot potato. But for the time being the PPS will make you money.

heh. Different philosophies.

When I hit +12% I put in a trailing stop for anything but the bluest of the blue. I've learned a few things in the past year and one of them is that I'm a pig.

The irony of our Berkshire dividend discussion is that I'm a yield hog.

[LawBeefaroni]

The irony of our Berkshire dividend discussion is that I'm a yield hog.

I've been looking at CEFs for yields. Right now I only have AOD but I'm scouring CEFA. Still not 100% on CEFs but I'm watching. The "distribution yield" (as defined by CEFA) can be scary when they touch capital. I also have HTE for the yield, it's an energy trust.

POT is still going...

[noxiousdog]

The irony of our Berkshire dividend discussion is that I'm a yield hog.

I've been looking at CEFs for yields. Right now I only have AOD but I'm scouring CEFA. Still not 100% on CEFs but I'm watching. The "distribution yield" (as defined by CEFA) can be scary when they touch capital. I also have HTE for the yield, it's an energy trust.

POT is still going...

One trick I learned was to go to a company's site that sells ETFs/CEFs and look at their NAV's. For example, here's Cohen and Steer's. Scroll down to RTU, UTF, and DVM and you'll see that they are currently trading at a double digit discount to their underlying stock value. I've made a 38% annual return on utilities (RTU) with this method.

[LawBeefaroni]

One trick I learned was to go to a company's site that sells ETFs/CEFs and look at their NAV's. For example, here's Cohen and Steer's. Scroll down to RTU, UTF, and DVM and you'll see that they are currently trading at a double digit discount to their underlying stock value. I've made a 38% annual return on utilities (RTU) with this method.

Heh, I was at that site last night looking at RQI and RTU. The discount to NAV angle is appealing along with the yields.

[noxiousdog]

One trick I learned was to go to a company's site that sells ETFs/CEFs and look at their NAV's. For example, here's Cohen and Steer's. Scroll down to RTU, UTF, and DVM and you'll see that they are currently trading at a double digit discount to their underlying stock value. I've made a 38% annual return on utilities (RTU) with this method.

Heh, I was at that site last night looking at RQI and RTU. The discount to NAV angle is appealing along with the yields.

I bought RTU when the discount way 16%. Looking at it right now, that DVM looks mighty appealing.

RFI has been really good to me, but while REITS have a definite place in my portfolio, I wouldn't expect double digit returns going forward.

[Carpet_pissr]

Lawbeef:

"For me, long term is a year or so. I don't like to try and see the future much beyond that. "

If you think like that, you definitely need to check out zacks.com, if you haven't already. I signed up for their Elite service several months ago and have paid for my sub (signed up for 5 yrs) already based on some of their picks that I have invested in.

I subscribe to M*, Motley Fool (several newsletters) and Zacks, to get a pretty disparate perspective, and mostly to cross-check. When all three line up on a stock (RARELY happens given their different perspectives), I load up baby! EBAY is in that trifecta right now. They all love it.

You probably know this already, but M* is long term, and mostly known for their fund picking (although they led me to my most profitable investment in a stock ever which was Elan), TMF is usually VERY long term (several years+), and Zack's probably has that quote from you above on their website somewhere. Deja-vous...have we had this conversation already? !

Anyway, Zacks focuses mainly on the month to month, and at MOST one year out. They say (paraphrased) too much further than that and you are trying to predict an unknowable future.

Noxiousdog: Please explain why PEG doesn't work for a company like APPL? I'm always in "learning" mode with investing. Thanks.

[noxiousdog]

Noxiousdog: Please explain why PEG doesn't work for a company like APPL? I'm always in "learning" mode with investing. Thanks.

For PEG to be a good measure, growth needs to be fairly predictable.

Another factor is that with any stock with a high PE, that PE multiple is going to start contracting as soon as growth rates start to slow.

For example, if we think that paying a 33 multiple on AAPL is a good idea because we want a PEG of 1.5, but a year from now growth slows from 22% to 15%, you're shaving 1/3rd of that P/E multilple you're willing to pay.


Note: PE and PEG are simply short, back of an envolope type measures to estimate the future cash flows of the company. What you really want to measure is all the future E's discounted back to present day.

[SpaceLord]

A new week, and the Dow is kinda "Meh", due to China's stock market taking a dive.

My portfolio, on the other hand, is looking good so far today, up over 1% since Friday.

I'm a part of the MFI Yahoo group, and since the book and group are more than a year old, some people have been reporting returns of up to 40%. Nice. We'll see how things turn out in the long term, though...

[LawBeefaroni]

I'm a part of the MFI Yahoo group, and since the book and group are more than a year old, some people have been reporting returns of up to 40%. Nice. We'll see how things turn out in the long term, though...

The last year has been stellar. The S&P is up 20% in that time. The real test is how any system works in both up and down markets.

The problem I've found with "systems" are that they aren't adaptive nor do they consider real-world news or trends.

[SpaceLord]

I'm a part of the MFI Yahoo group, and since the book and group are more than a year old, some people have been reporting returns of up to 40%. Nice. We'll see how things turn out in the long term, though...

The last year has been stellar. The S&P is up 20% in that time. The real test is how any system works in both up and down markets.

The problem I've found with "systems" are that they aren't adaptive nor do they consider real-world news or trends.

The MFI does adapt. All it looks at are price and value. And bad real-world news is often good for value stocks; it makes them even cheaper, In a period of well over 100 rolling years since 1988, the MFI has not lost money, according to Greenblatt.

Today, however, the Fed not lowering rates has depressed the market.

[Carpet_pissr]

I am considering liquidating some of my most volatile stocks in expectation of at least a market correction. Too strong, too fast.

I generally don't try to time general market trends like this, but I got pummeled in 2000 (or whenever the tech/net meltdown was) even though I had a sense of an impending crash/doom.

There are plenty of larger companies like BAC, MMM, JNJ, COF and some others that seem undervalued that I would be happy in.

Ebay as well. I really like eBay's valuation right now.

[LawBeefaroni]

I'm a part of the MFI Yahoo group, and since the book and group are more than a year old, some people have been reporting returns of up to 40%. Nice. We'll see how things turn out in the long term, though...

The last year has been stellar. The S&P is up 20% in that time. The real test is how any system works in both up and down markets.

The problem I've found with "systems" are that they aren't adaptive nor do they consider real-world news or trends.

The MFI does adapt. All it looks at are price and value. And bad real-world news is often good for value stocks; it makes them even cheaper, In a period of well over 100 rolling years since 1988, the MFI has not lost money, according to Greenblatt.

That's really not adapting. Assuming the same price/value result, how does it compare a retail sector stock and an energy stock? How about oil drilling vs. oil services within energy or discount vs. luxury within retail?

Real-world news isn't a blip on a TA chart or a variable for a formula. Real-world news needs to be analyzed individually. Sometimes overreaction can be a buying opportunity, sometimes it can be a trend.

Not really related, but see these two spins on the same earnings release:
Revenue, earnings up!
Profit drops by half!

I know what I'd do. You can see what others did. Out of curiosity, what would MFI say?

[SpaceLord]

I'm a part of the MFI Yahoo group, and since the book and group are more than a year old, some people have been reporting returns of up to 40%. Nice. We'll see how things turn out in the long term, though...

The last year has been stellar. The S&P is up 20% in that time. The real test is how any system works in both up and down markets.

The problem I've found with "systems" are that they aren't adaptive nor do they consider real-world news or trends.

The MFI does adapt. All it looks at are price and value. And bad real-world news is often good for value stocks; it makes them even cheaper, In a period of well over 100 rolling years since 1988, the MFI has not lost money, according to Greenblatt.

That's really not adapting. Assuming the same price/value result, how does it compare a retail sector stock and an energy stock? How about oil drilling vs. oil services within energy or discount vs. luxury within retail?

Real-world news isn't a blip on a TA chart or a variable for a formula. Real-world news needs to be analyzed individually. Sometimes overreaction can be a buying opportunity, sometimes it can be a trend.

Not really related, but see these two spins on the same earnings release:
Revenue, earnings up!
Profit drops by half!

I know what I'd do. You can see what others did. Out of curiosity, what would MFI say?

The formula doesn't care what sector companies are in. Trying to predict what a sector will do is very, very difficult. This kind of prediction is why very few mutual funds do well many years in a row. The formula only looks at the book value of a company, and the stock price. It's a decendant of the Graham/Dodd/Buffett school.

[LawBeefaroni]

The formula doesn't care what sector companies are in. Trying to predict what a sector will do is very, very difficult. This kind of prediction is why very few mutual funds do well many years in a row. The formula only looks at the book value of a company, and the stock price. It's a decendant of the Graham/Dodd/Buffett school.

I don't think what mutual funds do is relevant. Mutual funds aren't all sector based. Most are diversified across sectors.

It's not so much predicting what a sector will do as it is deciding whether the sector a specific stock is in is favorable.

Of course it sounds like you're talking long term (very long term by my standards ) and are willing to ignore established cycles in sectors. That's fine but checking PPS everyday is not recommended.

[SpaceLord]

The formula doesn't care what sector companies are in. Trying to predict what a sector will do is very, very difficult. This kind of prediction is why very few mutual funds do well many years in a row. The formula only looks at the book value of a company, and the stock price. It's a decendant of the Graham/Dodd/Buffett school.

I don't think what mutual funds do is relevant. Mutual funds aren't all sector based. Most are diversified across sectors.

It's not so much predicting what a sector will do as it is deciding whether the sector a specific stock is in is favorable.

Of course it sounds like you're talking long term (very long term by my standards ) and are willing to ignore established cycles in sectors. That's fine but checking PPS everyday is not recommended.

Eh, you're right. I should just ignore my stocks. But here I sit, in front a computer all day...

I just know that trying to beat the market in the short term has cost a lot of people a lot of money. Like Graham said, in the short term, Mr. Market is bat-shit crazy. Well, that's not a direct quote.

I really need to resist my urge to refresh my stock page on Scottrade.

[Carpet_pissr]

Refresh your page on Scottrade? Oh boy...then certainly don't get the bane of my work day productivity, aka Quotetracker

[Carpet_pissr]

OK, guys. How about listing your riskiest holding and your safest holding (in your opinion, who knows of course):

Mine:

Riskiest: NFLD (yes, still holding almost all that I bought pre-crash) Northfield Labs
or
ACUS (Acusphere, Inc.)

Both are extremely risky at this point, after having been smacked down recently. NFLD more than once.

"Safest": probably MMM or maybe even JNJ, take your pick.

[LawBeefaroni]

Riskiest: PTSC and XDSL. Both move a lot and I've been in and out a few times for profit. I just got more of both. Do not follow. One hinges on a court case and the other is run by a crook (my opinion).

Safest: No such thing, but the ones that lose me the least sleep are UTX and PHO.

I really need to resist my urge to refresh my stock page on Scottrade.

Scottrade has to have streaming RTQs and, possibly more what you want, real-time alerts.

[Carpet_pissr]

Scottrade has to have streaming RTQs and, possibly more what you want, real-time alerts.

They do...in fact the program I mentioned above has them in its feed...you just need to put in your username and password to log in.

[SpaceLord]

Scottrade has to have streaming RTQs and, possibly more what you want, real-time alerts.

They do...in fact the program I mentioned above has them in its feed...you just need to put in your username and password to log in.

NOT!!! LISTENING!!! NANANANANANA!!!!

[noxiousdog]

I don't really have a riskiest any more. Perhaps the CEF gold fund. Maybe one of the international funds.

A friend of mine has had extremely good luck with Motley Fool hidden gems, and I've been tempted to buy out of the money calls on his recommendations as pure gambling money.

Safest? Berkshire Hathaway.

[SpaceLord]

The stock market is a mess today.

Who knew raising prime rates in Europe would hurt the US stock market this way?

Luckily, I am still only down 1/2%, after a week of decent gains.

[raydude]

Safest: Exxon-Mobil XOM
Yearly dividends and a history of increasing profit year over year. What's not to like? Been holding this for about 6 years now and probably will stay in for a few more years at least.

Riskiest: Apple AAPL
Has a high PEG and a history of poor management. Still, I'm confident that under Steve Jobs they can still put out great product, find other niche markets and exploit them, and increase their market share in existing product lines.

[LawBeefaroni]

A friend of mine has had extremely good luck with Motley Fool hidden gems, and I've been tempted to buy out of the money calls on his recommendations as pure gambling money.

I almost sold some $115 puts on AAPL last week. There was an hour when I knew what my reasoning was. I went to lunch and forgot. I did remember that I'm trying to stay out of options.



My PHO trailing stop hit today while I was at a conference (no WLAN!! ). The only stop I had in.

So I have some cash to go bargain hunting with. But of coruse when I get back, it looks like everything is recovering. Might do some averaging.

[LawBeefaroni]

Ended up getting into Spirit AeroSystems (SPR) on Friday with the PHO proceeds. $34.62.

Critical days ahead with the 787 on 7/8/07 and the Paris Airshow around the 18th of this month.

[Montag]

I try to follow the Warren Buffet approach - find really good stocks, buy them, and hold them. I personally don't care about the stock price as much as the value I perceive in the company.

For example, when faced with buying 100 shares of redhat at $10/share vs. buying 12 shares of Microsoft at $80/share I don't look at it as a "100 shares" vs. "12" shares comparison. I look at the cash in the bank, debt, and cash flow, and pick Microsoft.

With that, I bought the following stocks at the share price of:

Apple $40.58 in 2005
Amazon $48 in 2005
Microsoft $21.47 in 2002
Dow Diamonds $82 in 2003
Google $416 in 2006
Starbucks $25 in 2005

I'm pretty happy with my unrealized gains so far. I check in quarterly with the financial reports and as long as they're doing well and have sound goals for the future I'm holding them till I absolutely need the money.

I bought Altrai Group (MO of Philip Morris) at 42ish. They have spun off Kraft so I got an exchange for a certain percentage of Kraft stock.

[LawBeefaroni]

Zecco has removed the minimum account balance for new accounts. You can start an account with $0. Margin accounts still have a minimum, obviously.

Zecco has free trades, though it's limited to 10/day and 40/month or something like that. After that they're $3.50. It's plenty of free trades for small position speculating in my experience.

Interface is barebones, but Zecco is legit.

Zecco/Zecco.com is not a securities broker/dealer. All securities and investments are offered through Zecco Trading, a division of Equinox Securities, Inc. Member NASD. Member of SIPC, which protects securities customers of its members up to $500,000 (including $100,000 for claims of cash) Explanatory brochure available upon request or at www.sipc.org. Additional securities protection is provided by Lloyd’s of London with an aggregate limit of $200 million providing that the combined return from Trustee distributions, SIPC and London to any customer does not exceed $35 million including a London cash sub-limit of $900,000. This coverage provides protection against brokerage insolvency and does not protect against loss of market value of securities.

[SpaceLord]

I've been reading *mostly* good things about Zecco, so how do they make money