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Herbalife, Still Trying to Shake Bill Ackman, Could Beat on Q1 Earnings

The much put upon Herbalife (NYSE: HLF) will post its earnings for the first quarter of fiscal 2016 on Thursday, and I’m going to go out on a limb and anticipate it will meet analysts’ estimates, if not beat them.

When I say “much put upon,” and “going out on a limb,” I’m referring to hedge fund manager and activist Bill Ackman who took controversial steps to run the company out of business. Claiming that Herbalife is a pyramid scheme, he shorted the supplier of weight management and nutrition supplements by $1 billion in 2012.

Ackman is convinced that Herbalife preys on minority communities who reap little in financial gains for being distributors of Herbalife products. Through extensive lobbying efforts, hours-long Power Point presentations, Ackman has managed to convince some lawmakers to join his cause in getting federal regulators to investigate and shut down Herbalife.

Although Ackman’s cause seems notable, on the surface, beneath it smacks the type of greed that could lead even the most well-intentioned causes failing to bear fruit.
 

 · Smooth sailing until Ackman

 
Prior to Ackman’s crusade to shut it down, Herbalife had posted 12 straight quarters of record earnings. It had enjoyed 12 straight record quarters and was trading around $52 in 2011, which was before Ackman’s billion-dollar short announcement.

Shortly after Ackman made his short position public in December 2012, Herbalife fell almost 50% in one day to close at $27.27. Over the course of 2013, and amidst volatile trading of its stock, the price slowly, but steadily, rose. It even hit an all-time high of $81.81 in January 2014. It closed Friday at $57.95.
 

 · Traders vs. investors

 
The volatility that Herbalife has experienced since Ackman’s attacks started make the company’s stock attractive to traders who can watch the stock’s movements like hawks and profit from them. After all, volatility is a trader’s best friend because of the potential for huge profits.

Volatility is not so good for long-term investors. It has a five-year beta of 1.4, which means it’s roughly 40% more volatile than the stock market. So long-term investors may want to shy away from Herbalife right now; at least there is some kind of resolution of squashing of Ackman’s allegations.

Interesting about analysts’ views on Herbalife are their reports. Since December 2012, there have been only two analyst downgrades. The others were reiterations, and there was even an upgrade. There have been mostly “buy” recommendations over that period.
 

 · When Wall Street meets Capitol Hill meets The Feds

 
In pursuing his effort to run Herbalife out of business, Ackman has called on community leaders, especially those that represent Hispanics and African-Americans, to join his cause. Many agreed to write lawmakers to urge the Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC) to investigate Herbalife. Ackman has also called on a slew of lobbying groups.

He’s been accused of assembling his supporters based on false information. Fortune magazine highlighted the tactic of astroturfing, in which “a client’s agenda is made to look like a grassroots movement. In the context of a short-selling campaign, however, such conduct began to resemble securities fraud. The SEC has held that if you make claims about a company you’re trading in and then falsely publish them under someone else’s name, that can be market manipulation, even if you believe the claims to be true.”

There are reports that some of those who signed these letters don’t recall doing so.

So far, other heavy weight hedge fund managers have been unpersuaded by Ackman’s findings. Take notary hedge fund manager Carl Icahn, for example. After Ackman presented his exhausting presentations about the legitimacy of Herbalife’s business model, Icahn took a long position in Herbalife. Another reputable investor, George Soros, also revealed a large stake in Herbalife after Ackman began lambasting the company.

For the sake of investors, small and large, I hope that The Feds do help resolve this issue. In the short-term, the market this week will get another chance to see how Herbalife has weathered the Ackman-generated turmoil that has wreaked havoc on its stock. As I noted above, the company reports earnings for the first quarter of fiscal 2016 on Thursday. Estimates are that it will report earnings of $1.07 per share; and $1.07 billion in revenue.

Don’t Count These Apple Suppliers Out Based on Slowed iPhone Sales

The disappointing earnings Apple (NASDAQ: AAPL) posted lastweek caused its stock to tank. We saw investors not only flee their positions in the iPhone maker, but we also saw them fleeing companies that supply the parts that Apple uses to build its smartphones, iPads and other devices.

The knee jerk reaction to this decline for many investors has been to get out of Apple and its suppliers in the short-term, or even the long-term. However, it may be worthwhile to hang in there for the long term when it comes to the suppliers.

Among Apple’s elves (suppliers) are Cirrus Logic (NASDAQ: CRUS) and Jabil Circuit (NASDAQ: JBL).I found that although these suppliers face repercussions from Apple’s sales’ downturn, they have individual strengths that have nothing to do with Apple. Those strengths include diverse product offerings that contribute significantly to their revenue growth. Their strengths contribute to their positive cash flows and attractive valuations.

 

 · The softening Apple

 

Apple reported shipping about 51 million iPhones during its second quarter of fiscal 2016, which represented a 16% decline compared to the same quarter in fiscal 2015. The numbers represented the first ever year-over-year decline in iPhone sales.

The softening partly reflects the slowing of smartphone sales throughout the world. Observers note that that the second quarter was the first time global shipments of the iPhone declined on an annualized basis since it was introduced. China’s smartphone market is maturing, which is a major market for smartphone makers.

 

 · Strong, but still Apple dependent

 

Cirrus Logic, which is a fabless semiconductor company that develops analog and mixed-signal integrated circuits, derives about a third of its revenue from Apple. It provides the audio chip to iPhones. Since warning flags began being raised at the end of 2015 about Apple’s shrinking iPhone sales, Cirrus Logic has been singled out as likely experience the worst ramifications of Apple’s declines.

Last week the company shared its quarterly Shareholder Letter that highlighted its financial results for the fourth quarter and full fiscal year 2016, which ended Mar. 26. Its revenue for fiscal 2016 was up 28% to $1.2 billion. That was higher than analysts’ estimates of $1.16 billion.

While its sales climbed 31%, its earnings per share fell 10% to $2.40. Cirrus also showed the company’s outlook, in which the company guided to fiscal Q1 revenues of $220 million to $250 million, which short of consensus estimates of roughly $256 million.

To stay viable as an investment opportunity, Cirrus must continue this kind of revenue growth. It must also continue to improve the median net profit margins so that it has operating leverage.

This is especially important if the company’s contribution to the upcoming iPhone 7 does not pan out. Apple is thought to be in the process of replacing its analog headphone jack for the iPhone 7 to add another speaker for stereo audio output. Rumors have abounded that Apple is working with Cirrus to change the audio chipset so that it works with the iPhone’s Lightning port.

The problem with this switch is that since the new iPhone may not have that standard audio port, the company’s current Ear Pod headphones will be incompatible. That could discourage buyers from purchasing the new iPhone.

No matter, if Apple does not make this audio port change, Apple’s need for Cirrus may be quashed. This means Cirrus must have a fallback.

Investors can take some comfort in the company’s supply chain teams being heavily engaged in new product ramps, take outs and design activity. Company officials stressed this during its earnings conference call last week in which it also noted that it has ramped a new flagship, multi-core smart codec with a key customer.

These products combine audio analog-to- digital converters (ADCs) and digital-to- analog converters (DACs) into single integrated circuits designed to provide maximum flexibility, features and performance.

Cirrus has also begun shipping a new boosted amplifier at another tier 1 smartphone customer, but it did not identify the customer during the conference call.

 

 · Then there’s Jabil Circuit

 

When Jabil Circuit reported its earnings, it noted that 24% of its total revenue came from Apple during its second quarter of fiscal 2016. Jabil Circuit slightly missed expectations for its Q2 fiscal 2016 reporting earnings per share of $.57 cents on sales of $4.4 billion, versus analyst expectations of $.60 in EPS and $4.5 billion of sales.

That is disconcerting, but I point to the company’s balance sheet as an example of its potential to grow steadily over the long term.

Another fallback that could take up the slack from less than stellar earnings related to Apple is the company’s Nypro healthcare business. The company has begun “leaning hard” into that business, according to its CEO Mark Mondello.

Nypro provides manufactured precision plastic products for customers in the healthcare, packaging and consumer electronics industries. It was acquired by Jabil Circuit in 2013. The company is expecting Nypro to be a healthy cash generator due to the hardware platforms it offers customers.

Jabil Circuit is also a leading provider of outsourced electronics manufacturing services (NYSE:EMS). This arm produces parts for consumer electronics, such as computers and smartphones. Jabil Circuit is banking on the scale and broad diversification of this business to provide “a stable, predictable, foundational backbone to our core business,” according to Mondello. He noted that the core operating income from EMS will grow 15% to 20% year-on-year, and core operating margins are hoped to grow beyond 3%.

When it reported its earnings, Jabil Circuit noted that 24% of its total revenue came from Apple during its second quarter of fiscal 2016. Jabil Circuit slightly missed expectations for its fiscal 2016 Q2, which ended Feb. 29. It reported earnings per share of 57 cents on sales of $4.4 billion, vs. analyst expectations of 60 cents EPS and $4.5 billion in sales.

Many observers are banking on Apple improving its financials after it rolls out another version of the iPhone later this year. This, in turn, could boost the earnings of its suppliers. On the other hand, the saturation of the smartphone market cannot be ignored; investors must take into account that the record profits Apple derived from iPhone sales in the past are over. The Apple suppliers that recognize this and who are able to shift gears to maintain, and improve their financials over the long term should be able to weather the Apple downturn.

How an Elevator Company More Than 160 Years Old is Using Disruptive Technology to Reach the Cloud

When you think about elevators, you may become instantly bored. Up, down… what else is to it?

Well, Otis Elevators, a unit of United Technologies (NYSE: UTX), is recognizing that there is a lot more to it when you tap into the disruptive technology known as the Internet of Things, or IoT. Over the last few days, Otis and United Technologies have inked agreements with AT&T (NYSE: T) and Microsoft (NASDAQ: MSFT) to expand the use of IoT solutions, including cloud-computing. The goal is to make elevators smarter.

Observers note that cloud-based applications are key to IoT, which has been named as a disruptive technology. As a 160 year-old company, Otis stands to benefit greatly from expanding its relationships with AT&T and Microsoft because it is poising them to take advantages of innovations that could improve their top and bottom lines. The IoT solutions provided by these companies that can help Otis shed old business practices that made it difficult to operate as efficiently as possible.

 

 · Putting disruptive technology to use

 

In addition to building elevators, escalators and moving walkway equipment, Otis also services its products. By collaborating with AT&T and Microsoft, Otis clients will be able to use the gathered information to improve the performance of their Otis-installed elevators, among other products.

An estimated 30,000 employees who service Otis elevators worldwide will benefit from the collaborations.

Microsoft chief executive officer Satya Nadella described the elevator itself as a digital product in this day and age. During the announcement of the tech company’s collaboration with the elevator maker, he said,

“Every elevator is going to be connected. Every elevator is going to have predictive and analytic capability.

By working with Microsoft, Otis can accelerate efforts it already has underway to expand the use of internal productivity apps. Also, the company wants to transform its elevator service by applying tools that help it better connect to its customers and improve service.

That’s where Microsoft’s technology comes into play. Otis will expand its use of Microsoft’s cloud service, which is called Microsoft Azure IoT Suite. Otis will also expand the use of Microsoft’s Cortana Intelligence Suite to use big data to monitor and maintain the conditions of its elevators. Lastly, Otis will expand its use of Microsoft’s customer relationship management system, called Microsoft Dynamics CRM. In a statement, Otis noted that its deployment of Microsoft Dynamics CRM is significant because it will allow it to “offer a comprehensive cloud-based solution to enhance the customer experience and accelerate business productivity.”

Working with Microsoft, Otis will accelerate efforts underway across the organization to expand the use of internal productivity apps being developed by field teams around the world. Furthermore, the use of Microsoft’s CRM system will allow it to link operations in the more than 200 countries and territories where Otis offers its products and services, according to the statement.

In working with AT&T, Otis will tap the telecom’s IoT portfolio, also, to gather data and perform big data analysis through the cloud.

According to a statement from AT&T, Otis companies around the world will be able to use AT&T IoT technology to aggregate data from cell networks and connect to a new enhanced cloud environment.  AT&T’s Global SIM card and IoT Services, such as Control Center and M2X will allow Otis to access real-time equipment performance data. In addition, AT&T will serve as the primary mobility provider for Otis field operations, noted the statement.

Philippe Delpech, the president of Otis, said that its new generation of elevators will be defined by new digital tools that better connect its people with its customers – and its customers with their equipment.

 

 · Moving forward

 

Delpech added that by leveraging AT&T’s IoT technology, it will be able to harness data generated by the nearly two million elevators currently under Otis service contract transporting more than two billion people per day. Otis has about 30,000 mechanics who spend roughly 60 million hours a year servicing elevator and escalator equipment.

With those kinds of high numbers for its products, workers and time, it is quite brilliant of Otis and United Technologies to seek the IoT solutions of both AT&T and Microsoft. IoT has been called the next Industrial Revolution, as observers believe the technology will change the way businesses maximize their abilities to connect digitally.

According to a report produced by Bi Intelligence, 34 billion devices will be connected to the Internet by 2020. That is up from 10 billion in 2015. 
Nearly $6 trillion will be spent on IoT solutions over the next five years. Microsoft‘s vice president of global accounts said United Technologies is at the forefront of an “essential shift, using technology to make buildings and transportation function more efficiently and move the world forward.”

Considering the growth of IoT solutions and their reputations of accelerating the development of digital solutions for smart building equipment, it is a very good move on the part of Otis and United Technologies to tap AT&T and Microsoft to improve energy efficiency and help its employees become more productive.
United Technologies reports earnings for Q1 2016 on Wednesday. Analysts estimate that it will report earnings per share of $1.39 on $13.18 billion in revenue.

This week United Technologies announced an increase in its quarterly dividend, which will rise to $.66 from $.64.

The dividend hike, and the collaborations are attractive, especially if you are in search of a solid long-term investment. United Technologies is poising itself to take advantage of the growing IoT market. This shows that this company that has been along for about 160 years is not allowing innovation to pass it by.
 

Whatever Their Q1 2016 Earnigns, Biotech/Biopharma Companies Are Strong Long-Term Plays

We’re into our third week of Q1 2016 earnings reports, and we have seen sectors we thought would horribly disappoint, beat estimates, while those that many thought would beat with flying colors, disappointed.

Up this week to report their most recent earnings are several biotech and biopharma companies. Despite the volatility in the spaces, I like them because regardless of their size or specific designations, many of the firms that operate in the spaces are making considerable strides that should pay off over the long-term. This includes Amgen (NASDAQ: AMGN), Gilead Sciences (NASDAQ: GILD), and INSYS Therapeutics (NASDAQ: INSY).

I won’t make the mistake of trying to predict how the earnings of these companies will come in for the first quarter of this year. As I noted above, we have already seen the trappings of such guesses. The big banks beat estimates, and many did so on both their top and bottom lines. That had not been expected given the many challenges the banking space has faced, including strict regulations and the low interest rate environment.

When many of the tech giants prepared to report last week, it was anticipated by many observers that these companies would strongly beat estimates. However, many of them failed to live up to investors’ expectations on earnings and guidance. That sent many of their stocks tanking.

 

 · Biotech versus biopharma

 

To be clear, there is a difference between biotech firms and biopharma firms, which affects the strategy you may use in investing in them. For the most part, biotech firms are riskier investments than biopharma companies because they have more products in the research and development (R&D) stages than do biopharma companies. Because a biotech firm may have few, or no, products on the market, they are not receiving revenue from their efforts. Biopharma companies, on the other hand, likely have products for sale in the market. They are likely to be not using as much operating cash on R&D. The existence of revenue from products being sold can position biopharma stocks as more attractive and less volatile than biotech stocks.

 

 · Growing up

 

One of the most popular companies in the biotech space that I anticipate faring well over the long term is Amgen. It reports on Thursday after the bell. While the consensus is that it will report an earnings per share of $2.56, the “whisper” EPS is $2.70. Its market cap has grown from $50 billion five years ago, to $122 billion today.

Also, there has been impressive growth in its EPS, which has climbed to $9.06 at the end of fiscal 2015 from $4.04 in 2011.

Amgen’s growth largely stems from the company being able to grow many of their products from their infant stages of R&D to products that are now on the market. One of those products is Enbrel, which is used to treat rheumatoid arthritis, plaque psoriasis and psoriatic arthritis.

Over the long-term, I expect to see Amgen continue to grow its net income and revenues, while expanding its profit margins and maintaining reasonable valuation levels.

 

 · Diverse offerings

 

In the bio space, it is important that companies have diverse offerings. Take Gilead, for example. As a biopharma company, Gilead develops and markets drugs to treat patients with infectious diseases, including bacterial, fungal and viral infections. It makes the popular Tamiflu, which is use to prevent the flu. Gilead’s HIV drug offerings are also popular.

Tech Investing Daily points out that Gilead’s earnings for 2015 hit $9.28 a share, which is more than four times its earnings in 2013. On a year-over-year basis, quarterly earnings are up a “healthy” 22.9%, according to Tech Investing.

Like Amgen, Gilead has enjoyed expanding profit margins. Also, its total revenue continues to grow impressively. The S&P Capital IQ found the company’s total revenue grew roughly 30% from 2014 to 2015.
With a market cap of $138 billion, Gilead is the largest company operating in its space. It trades at discounted valuations compared to its competitors. This could be due to the slowing growth of its hepatitis C drug. Called Sovaldi, the expectation that the sales of the drug in the coming months will not be as strong as they have been previously could be contributing to the company’s low valuations.

In spite of Gilead’s overall growth, the company still trades at a P/E of 8.55. That compares to its peers’ much higher P/E ratios. Amgen’s is 18.01 and Insys Therapeutics’ is 20.94.

 

 · A smaller player making strides

 

Lastly, I took a look at Insys Therapeutics and its efforts in developing products to treat epileptic children who have treatment resistant seizures, as well as people in their final stages of cancer who have developed a tolerance to most opioids.

Insys Therapeutics touts itself as a specialty pharmaceutical company that develops and commercializes innovative drugs and novel drug delivery systems of therapeutic molecules that could help improve the quality of life of patients.
However, recent developments are raising concerns over the use of its main drug, which could negatively affect the drug’s sales, and the company’s earnings. The concerns are over its Subsys drug, which is reportedly 100 times more potent than morphine.

Sales of the drug began to flatten during fiscal 2015. The company’s guidance indicates that sales of the drug during Q1 2016 would come in almost $25 million lower than analysts’ estimates of $86 million.
Despite the lowered expectation for the first quarter, analysts are confident about the stock’s performance over the next 12 months. The average 12-month price target is $23, suggesting upside of 61% from recent levels near $14.25.

A decision about Syndros from the Food and Drug Administration is expected by July 1. Also, Insys Therapeutics’ pipeline includes a synthetic cannabidiol for certain childhood epilepsy syndromes.

The Street summed up Insys Therapeutics this way. The company exhibits strength and weakness, “with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company’s strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and compelling growth in net income. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.”

So for this stock, the temptation may be to sell it if you own it, but don’t. Instead, if you own it, hold it. I’d wait until at least the FDA has made its decision before jumping in. A key factor in making your decision relates to the company’s ability to remain profitable despite lower sales for Subsys, and the delay in making any sales from Syndros as it awaits the FDA’s decision.

 

 · Moving forward

 

Whether they define themselves as biotech or biopharma, companies in this space have considerable potential to grow significantly over the long term due to the much-needed medicines they develop. In the short-term, the market for these stocks will continue to be volatile. For those with long-term investment ideals, biotech and biopharma companies may be the way to go.

Why I am not a passive investor.

When I was browsing the internet looking for investors trading actively options and blogging about it I didn’t find many.

But I found a lot who claimed to be passive investors investing into dividend stocks, buy stocks and hold them. The only time when they sell is when they find that the stock they hold may be in danger or its dividend may be in danger. Some are lucky and sell on time, some are not lucky and end up holding the bag of worthless stocks. And some sell the stock and the stock never falls and continues thriving.

I experienced all three situations as a dividend investor.

It is completely okay to be a passive investor if it works great for you, or you do not have time or capacity to learn how you can squeeze more out of your stocks.

I am not satisfied as a passive investor.

I want more. And I am willing to spend time, effort, and money to learn more.

 

 · Why I am not a passive investor?

 

Because I believe that my money can do more if they are active, if I make them actively work for me as my employees.

However, I do invest passively and build my dividend portfolio because there will be days when I might not be able to trade anymore. I will be so old that my brain will not be capable trading.

Or I will not want to actively manage my portfolio anymore and watch my positions almost on a daily basis.

Or I will want to travel and go to places where I will not have access to my account and manage my positions.

There are many reasons why I want to build a portfolio of dividend stocks.

But that’s future.

Today, I am still relatively young and I want to maximize my potential and boost my trading and make more money than just investing into stocks and wait next 20 years to see results.

I want to spend those 20 years enjoying income from trading and yet have enough to stop trading 20 years from now.

Options can do it for you.

 

 · Why I am an active investor?

 

As a passive investor you are a dependent of the market. It is the market which forces you to ride its waves. You are a spectator here.

I have heard passive investors saying how glad they were to be passive during the recent market’s selloffs. Now we are back and they made 2%.

But it can still change. May can be a disastrous month and we may see heavy selling. My passive portfolio is still in an overall loss. With more selling, it will be even bigger loss.

In my passive dividend portfolio I have approx. $19,000 invested and that makes me around $75 dollars monthly income.

My active options trading portfolio has approx. $7,000 dollars invested (or used for trading) and it makes me approx. $400 monthly income.

Which is better?

This is why I am not a passive investor but use options strategies to actively use my money to make more money in any market. I am not a spectator anymore.

You can join our options trading group and learn how you can use your dividend stocks to boost your income beyond dividends.

Q1 Earnings for Big Banks Expected to be Dismal; Improvements on Horizon

Well, it is earnings season time again. Companies begin to report their earnings for the first quarter on Monday, with the traditional season opener Alcoa (AA) leading the way. However, the stocks I will be watching most closely are big bank stocks, particularly considering the industry regulations they have had to deal with so that the banking debacle of 2008 won’t occur again.

The street expects for bank earnings for Q1 2016 to be bad. Most analysts forecast that earnings for the biggest banks to be down 20% for the largest banks, according to Thomson Reuters.

The big players

The big banks consist of JPMorgan (JPM), Bank of America (BAC), Wells Fargo (WFC), Citigroup (C) and Goldman Sachs (GS).

JPMorgan is up first, reporting on April 13. It is also the largest of the group in terms of market cap, followed by Bank of America and Wells Fargo, which report on April 14. Then Citigroup, which reports on April 15. Goldman Sachs reports the following week on April 19.

Playing on a new field

For all of the big banks, trading was sluggish and volatile during the first quarter of the year. Declines in commodities prices aggravated the situation. While some of the banks saw trading activity increase last month, observers say it was not enough to make up for the declines in January and February.

Banks have also been challenged by restrictions on proprietary trading, which have left them less profitable. Larger capital required to participate in fixed-income trading has also been a challenge.

They are also still dealing with the effects of the new rules that went into governing derivatives. The rules went into effect in 2010 due to the Dodd-Frank Wall Street Reform and Consumer Protection Act. Specifically, the act requires banks to post billions of dollars of collateral for certain derivatives trades.

Analysts who follow the performance of these banks have been lowering their first-quarter estimates all quarter. Reuters reported the following:

JPMorgan is expected to report adjusted earnings of $1.30 per share, Bank of America to report 24 cents per share, Wells Fargo to report 99 cents per share, Citigroup to report $1.11 per share, and Goldman is expected to report $3.00 per share. In fact, observers say Goldman Sachs had the worst quarter of all of the banks, with one report saying it has had the lowest first-quarter earnings since before the financial crisis.

Bank of America to report 24 cents per share, Wells Fargo to report 99 cents per share, Citigroup to report $1.11 per share, and Morgan Stanley to report 63 cents per share. Goldman is expected to report $3.00 per share, the lowest first-quarter earnings since before the financial crisis.

While there are skeptics, I think that the banks that are able to generate good returns above their costs of capital stand to improve their financials over the course of this year and into next year. If they can maintain or improve their credit qualities and increase their capital levels, they could be good choices for investors whose tolerance has waned for these troubled banks. However, beware of companies that are trading below their tangible book values; this may signal their problems are insurmountable.

 

 

 

 

 

 

Posted by TwillyD April 09, 2016

Viacom’s Soul Train Buy Could Have Investors Tooting Their Horns

If you remember the Good Ole days of the 70s, you may get fuzzy butterflies when you read this story.

The music show, Soul Train, has been purchased by Viacom (VIAB). Even if you don’t remember the show, or you could care less, I thought to bring it to your attention because of the impact the purchase could have on Viacom’s bottom line. There may be some good investment opportunities if you are willing to stand to climate of the media industry right now.

The acquisition could be a boon for Viacom because it will couple the historically black music show with BET Networks, which is a division of Viacom. Viacom, like other media companies, are struggling in this new electronic age.

This combination represents an investment in an iconic franchise that lends itself to providing fans with a wide range of experiences across multiple platforms, beyond the television programs that audiences have watched for decades. The transaction serves to further strengthen BET’s investment in content and underlines the network’s leadership in music-related content.

According to a Viacom press release about the deal, owning Soul Train’s intellectual property will allow BET to further build on the success of the Soul Train Awards, which BET re-launched in 2009. It also strengthens the network’s commitment to original content. The assets acquired include one of the largest libraries of African American, music-oriented content in the world, including more than 1,100 television episodes and 40 television specials.

The addition of Soul Train could allow Viacom to create ancillary revenue opportunities ranging from live events to consumer products.

This is very important considering Viacom’s financial performance has led to declines in its stock price. Its shares are trading far lower than its 52-week high. It closed last week around $44, while its 52-week high was $72.72.

Also, on last week, RBC Capital Markets issued a negative note on Viacom. RBC’s action sent Viacom’s shares lower. RBC initiated coverage of the stock with an “underperform” rating and a $34 price target. The report stated overall that analysts, compared to its peers,  thought Viacom has “significant structural challenges” and “epitomizes ecosystem concerns.”

I won’t be too hard on Viacom, however. That’s because companies operating in the media space that are publicly traded are offering discounts on their stock trades like those that are usually seen when there is a recession. Many media stocks are selling off.

While it is faced with problems, Viacom has some characteristics that are positive. Its gross profit margin dropped slightly from 51.47% in the first quarter of 2015 to 49.49% in the first quarter of 2016. But its return on equity dropped from 69.95% to 50.59% for that same period.

Also, it offers a 3.84% dividend.

So maybe the Soul Train will offer the company just what it needs to get back on the right track. In the meantime, I think the company is a hold.

 

Posted by TwillyD April 09, 2016

Seeing Some Wrinkles in Yahoo! Acquisition

After Verizon (VZ) bought AOL (AOL) last year, I said to myself (like many others probably), “which big wireless carrier is setting its sights on the other Internet company – Yahoo!?”

Could it be AT&T (T) or Sprint (S)? The last thing I thought was that Verizon would go after the failing Yahoo!, snapping up the one of the last remaining Internet providers. This is not a good year. I had sharp pains of AOL getting in over its head by purchasing Time Warner in 2000. My concerns were eased a bit when I heard that Google (GOOG) or Alphabet (GOOGL), may get in on the deal. No matter, one of the last surviving Internet providers, Yahoo!, is at the end of the days as we know it. Even Time (TIME) may throw a bid out there.

Last year, Verizon paid $4.4 billion to acquire AOL; it’s looking to pay $8.5 billion to buy the Internet portal’s stake in Yahoo Japan.

How much value can Yahoo! add

There are naturally some investors who are happy about the acquisition. However, there are some heavy hitters that support it. One of those is value investor Mario Gabelli who said on CNBC Friday said he supported a buyout of Yahoo!’s core Internet media and search business by Verizon.

Verizon has noted that the acquisition would further its strategy to build out its LTE wireless video and streaming video strategy. That could be combined with AOL’s ad technology platform, which was widely reported to be at the heart of Verizon’s bid.

Worries about add Yahoo!

Yahoo! has really had a hard time of it; despite hiring top Google executive Marissa Mayer. Since being hired in 2012, she has failed to gain positive results through several turnaround plans.

The writing about the future of the company was clearly on the wall last year. I recall a story in Bloomberg that noted Mayer wanted shareholders to wait at least another year for Yahoo! to explore and complete the spinoff of its Internet businesses as outlined Dec. 9, which was “simply unacceptable.”

Through the acquisition of Yahoo, I think Verizon is trying to gain more of a foothold in the online industry, which as you know is constantly changing. However, buying a failing business that seems to have fallen behind in the communications seems risky. And for Verizon, I anticipate struggles, because, afterall, it is a wireless carrier.

The fact that it already has a business (AOL) in its coffer’s that was ailing at the time it was purchased, means Verizon has two possibly troubled businesses.

Yahoo has pushed back the deadline for bids for the business until April 18, to give more companies to bid.

 

 

 

 

 

 

Posted by Martin February 11, 2016

Markets still flashing a recession

CNBC has it sometimes right, be it Rick Santelli or Carter Worth. Although many technical analysts saw this way before Carter, it holds water. Watch and judge for yourself:

 

 

Posted by Martin February 09, 2016

Is Yellen going to sway the markets tomorrow? Probably not.

But some of those FED addicts may hope for it.

All of us others let’s be prepared for any outcome and make our trades accordingly.

Those who hope for Yellen saving the trend will be probably disappointed tomorrow and even if the market shows us some push, I believe, we are way beyond any trend repair. It would take an enormous push or a constant growth to reverse this trend.

And unfortunately, there is no catalyst out there for a push or a constant growth. So even if we jump higher, such bounce will be sold off. And I will do the same if that happens.

Here is a reason for my bearish stance:

SPX trend

This is a chart from the beginning of the month (February). The magenta lines indicate a regression channel. The small dashed lines are my own projections. At the beginning of each month I align them with the magenta regression channel lines. This was January alignment.

As you can see, over the January course, the regression channel sloped further down, away from my dashed lines clearly indicating that the bear market is deepening. To repair this market, we would have to rally above 2050 and stay there for a prolonged time to start reversing the channel into upward sloping one.

But there is no strength in the market to do that. As of now, our best shot would be a relief rally to 1940 before we sell off again.