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Posted by Martin June 01, 2016
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Internet of Things Spurs All Sorts of Investment Opportunities


The Internet of Things (IoT) continues to evolve as businesses in all sectors are taking advantage of the solutions and applications that can make their operations run more smoothly. From the birth of IoT is IoMT, which is the Internet of Medical Things.

Over the past few years, there has been a surge in the number of healthcare providers that are taking advantages of the solutions from IoMT. At the forefront of many of these IoMT strides are small, privately-held companies. Many of their inventions are cutting edge, which could make them excellent takeover targets by larger, publicly-traded companies.

We’ll review some of these privately-held companies in this piece. We’ll also touch on how these companies are using the technologies developed by larger, more established companies to help their own products work.

 

 · What does IoMT entail?

 

The IoMT entails collecting medical and patient information from medical devices and uploading that data into a cloud platform. In addition to medical devices, applications are used in conjunction with online networks to connect healthcare IT systems, as explained by Intersog.com.

These medical devices typically run on Wi-Fi to ensure that the connection to other devices is as seamless as possible. The IoMT also often entails the use of cloud services where the data collected from the devices is stored. And there’s security, which is important given the many regulations that govern healthcare providers to make sure that patient records are protected and private.

Therefore, the companies that provide any of these services stand to gain just as much as the developers of the products. Keep an eye on how wireless providers like AT&T (NYSE: T) and Verizon (NYSE: VZ) participate in the IoMT space. Amazon, Microsoft and Salesforce could see their revenue streams from their cloud services receive a boost if they make strides in penetrating the IoMT markets. And companies that provide Internet security solutions, such as Palo Alto, can also benefit from working with the developer of some of these medical devices.

 

 · Smart pill bottles

 

There are a host of products that consumers use in their everyday lives that have been enhanced thanks to IoMT solutions. This includes pill bottles that could be the solution to one of the most aggravating situations faced by healthcare providers. Called medication adherence, healthcare providers have said that the incidences of patients forgetting to take their medicines as prescribed continues to be a growing health concern.

To answer this problem, a privately-held company called AdhereTech, has developed a pill bottle that helps patients remember to take their prescribed medicines.

AdhereTech’s smart wireless pill bottles are built with cellular technology and numerous sensors. These bottles collect and send adherence data in real-time to AdhereTech’s servers where it is automatically analyzed and populated on the company’s secure dashboard. If doses are missed, AdhereTech’s system can notify the patient via automated phone calls and/or text messages.

AdhereTech’s pill bottles are currently only being used by patients in pharmaceutical and research trials.

Considering AdhereTech’s pill bottles depend on wireless connections, it must have the help of wireless providers. Wired has reported that the company was in the process of setting up contracts with a wireless provider, as well as a cloud service provider, such as Amazon.

 

 · IoMT helping to fight smoking addiction

 

Another example of the breadth of the use of the IoMT, are companies whose wearable devices are being aimed at combating addictive behaviors. One such device, called SmartStop, is a wearable that offers programmable, transdermal nicotine replacement therapy in combination with real-time behavioral support, according to the device’s developer, Chrono Therapeutics.

The company points to research that shows that smokers have clear, consistent and predictable daily peak nicotine craving patterns. Chrono Therapeutics boasts that SmartStop is designed to automatically vary nicotine levels throughout the day to match those patterns. The device uses Bluetooth technology to wirelessly communicate with the SmartStop behavioral support mobile app, providing real-time guidance to help smokers cope with cravings as well as a means for promoting compliance to the NRT and overall quit process.

Just as with AdhereTech’s smart wireless pill bottle, SmartStop’s reliance on players that offer wireless and cloud services, as well as Internet security solutions, can benefit for having their applications used with this device that was created through the IoMT.

 

 · The future

 

I expect to see more and more versions of IoT, such as IoMT, come to light. It’s being said repeatedly how the Internet is becoming a daily, integral part of our lives. As an investor, look for these small companies that are privately-held companies based on the significance of their creations. Also watch the larger publicly-traded companies to up their game by creating competitng products, or simply acquiring the “little guy.”




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Posted by Martin May 30, 2016
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May 2016 trading, investing, and dividends results


At first, May 2016 trading started slow and I had a very low expectation of it. Many of my trades got in the money and I had to roll them away in time. I thought I would not be able to repeat my income from the previous month. But then the trades turned all around and this month ended even better than the last one.

In April I made $938.00 in collected option premiums but this month I finished with $1,262.00 my goal on collecting min. $1,000 per month.

Now, I just need to be able to repeat this in the next month and the following ones.

May dividend income was lower as May seems to be a slow month. The dividend income was only $57.75 vs. $84.49 last month.

Options Income = $1,262.00 (account value = $2,910.54 +14.60%)
Dividend Income = $57.75 (account value = $19,398.29 +1.26%)

If you wish to see details about each account, continue reading below.


 

 
You may be interested in:

 
Where Do Dividends Come From? By Dennis with Dennis McCain Investing

 
Recent Buy: Valero Energy Corporation By Ferdis with DivGro

 
Smart Financial Investments For 2016 And Beyond By Keith with DivHut

 
Lanny’s May Dividend Income Summary By Lanny with Dividend Diplomats

 
The Importance of Revenue Growth In Selecting Winning Investments By JC with Dividend Growth Investor

 
The Power of Dividends By DL with Dividend Ladder
 

 

Read More




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Posted by Martin May 28, 2016
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Hot Housing, Food Services IPOs Shed Light On Economy’s State


You may have heard by now that the initial public offering market got a boost last week, with several solid companies bringing their deals to the market. Let’s look at two of them that are considered to be staples of the food and housing spaces as their performance can shed some light on how much confidence investors have in the economy.

We’ll begin by reviewing how the IPO market ran cold in recent years and what’s behind it starting to look appealing again. Then we’ll look at how US Foods (NYSE: USFD) and Gypsom Management & Supply (NYSE: GMS) positioned themselves to go public and the challenges they face moving forward.
 

 · Why the IPO market slowed

 
Overall, the companies did well, trading above their offering prices. An estimated $1.5 billion was raised by the companies that went public last year.

To get an idea of how unappealing the IPO market had been this year before last week’s flurry of activity, consider this. Thirty one deals priced during the first quarter of this year, raising roughly $5.4 billion, which is a decrease of about 55% from last year.

So far this year, there have been just 10 IPOs. That includes the five from last week, and another five in February. The lack of the deals has shaped up for 2016, so far, being the slowest year for IPOs since 2009.

There is a laundry list of reasons why the IPO market stalled. Market volatility is a problem. The volatility index, or VIX, which measures the amount of investor fear in the market, was as high as 30 in February. It has since come down to about 13.12 as of Friday.

Then there are the concerns about the global economy. Just as China remains a thorn in the side of the global economy, it is having an effect on how investors see a company’s valuation. Bob Blee, head of corporate finance at Silicon Valley Bank, told U.S. News that the value of a company’s equity is related to the cash it can generate now and into the future. Furthermore, he noted that changes in the world’s economic outlook create uncertainties in a company’s future cash flows and add another layer of complexity to the valuation analysis.

Investors are also looking at the performance of companies that went public last year. Not too many are doing well. It is estimated that almost three-fourths of them are trading at prices below their IPO price and their overall return was a meager 2%.

If you are interested in investing in a newly publicly listed stock, be cognizant of the risks, which are typically higher than that of established public companies.
 

 · Last week’s IPOers

 
The companies that made headlines last week for their IPOs ran the gamut, indicating that companies from all spaces may be comfortable enough with the economics of the market to go public. All together, they raised $1.5 billion. That means this was the market’s biggest day in terms of the number of the amount of money raised.

US Foods raised the most; $1.02 billion with the sale of 44.4 million shares. It debuted with a share price of $23 on Thursday. By the market’s close, it was trading at $24.91 a share. That gives it a valuation of just over $5 billion.

Its net sales for the fiscal year ended Jan. 2 were $23 billion. It’s carved out about 9% of the food services market.

Those numbers are impressive, but there is a blemish that investors must keep in mind. US Foods has a ton of debt, to the tune of roughly $5 billion. The company can use the proceeds to help pay down this debt, but it will clearly still have some ways to go.

On an enterprise value to EBITDA basis, US Foods is cheap compared to its main competitor, Sysco. It trades at a “justifiable” discount to fast-growing Sysco, notes TheStreet.com.

I wouldn’t consider US Foods to be a growth stock, especially considering they were operating at a loss just one year ago, and have struggled to profit in other years, including this one. I’d wait to see how its finances shake out over the long-term before jumping in to US Foods. If you decide to get in, watch carefully in future earnings reports how the company plans to pay down its debt.

GMS is a distributor of wallboard and suspended ceiling systems. These systems provide a comprehensive solution for its core customer, the interior contractor who installs these products in commercial and residential buildings. A boost in its revenues indicates a pick up in the housing industry.

GMS opened at $22.50 a share, which was 7.1% above the IPO price of $21. It raised $147 million, and has the potential to raise another $22 million if the underwriters of the deal buy additional shares.

The company’s chief executive officer told The Street that its company is thriving due to the surge in housing starts. He noted that there is a shortage in housing, with homes being listed and sold above the asking price. He also told The Street that GMS’s business is 40% residential and 60% commercial.

Investors should take note that U.S. housing starts are rising, and are expected to grow further this year. With a network of vendors that distribute more than 10,000 unique products from the manufacturers across the nation, GMS is well positioned to benefit from the uptick in housing starts. I would consider it to be a growth stock that would make a sound long-term investment.




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Posted by Martin May 27, 2016
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Jump On Board These Cruise Names; Space is Ripe for Growth


Despite several negative news events over the past few years, the cruise line industry is proving to be quite resilient. Cruise lines continue to attract a record number of passengers each year, who seem to have deep pockets when it comes to spending on activities while on board.

For these reasons, and others, you should consider some of the players in this space of the leisure industry if you are in search of strong growth stocks.

The lines that dominate the cruise industry include Carnival Cruise Lines (NYSE: CCL), Royal Caribbean (NYSE: RCL) and Norwegian Cruise Lines Holdings (NASDAQ: NCLH). The latest quarterly earnings reports they have posted for fiscal 2016 indicate that they are well-positioned to weather the sometimes volatile nature of the cruise line business and maintain strong balance sheets.

Each of them has upwardly revised their full-year guidance for 2016, and observers note that this year is shaping up to be a banner year like last year.
 

 · Reasons for growth

 
According to Barron’s, cruise lines will see revenue gains of at least 20% this year. That’s partly due to the uptick in global demand. Specifically, in China, the country’s wealthiest are flocking to cruise ships.

The Cruise Line International Association expects 24 million passengers to sail this year. That’s up from the 10 million passengers that sailed 10 years ago.
Cruise lines are also enjoying lower fuel costs, which is significant as the lines continue to roll out larger vessels. Royal Caribbean already boasts having the world’s largest ship, and it just announced that another ship of the same, or larger, size will be on line in 2021.

Cruisers know that the low rates they may have received for booking their trips will likely be mitigated by the myriad expenses they will have to pay for their onboard activities. For example, although many food services may be free, passengers may have to pay for some restaurants. This is part of the cruise line industry’s effort to bump up the meal options onboard the ships.
 

 · Strong earnings

 
Cruise lines did well during the last quarter, with most of them beating analysts’ estimates. Norwegian, which is the smallest of the three noted in this story, were up roughly 48% on a year over year basis. Net income was $73.2 million, or $0.32 per share compared to a loss of $21.5 million or $.10 per share in the prior year.

Norwegian raised its full year guidance for 2016. It sees earnings now being between $3.65 and $3.85 versus previous guidance of between $2.80 and $2.90.

Royal Caribbean rolled out a plan in 2014 to meet aggressive revenue targets, and so far it is on path to meet them. Called double double, the company’s chief executive said the initiative “sets demanding, but realistic targets” that give the plan its name: double the company’s 2014 earnings per share by 2017 and increase return on invested capital to double digits.

So, during the last quarter, adjusted net income was $124 million or $.57 per share, versus $45.2 million, or $.20 per share in 2015. The company increased its full year earnings guidance by $.25 per share. It now ranges from $6.15 to $6.35, which, compared to 2015, would be an increase of 27% to 32%. Some analysts say the earnings could reach at least $7.20 per share next year.

Royal Caribbean continues to implement its $500 million share repurchase program. Since the program was announced in October 2015, the company has repurchased $450 million worth of shares.

Lastly, there’s Carnival. As a reflection of its positive financials, Carnival received an upgrade to some of its debt by Moody’s Investors Service. The ratings agency said the upgrade acknowledges Carnival’s continued strong earnings growth, which has led to its operating margins reaching the levels it maintained prior to the 2012 and 2013 ship incidents when people onboard became ill.

During the last quarter, Carnival’s income was $301 million, or $.39 a share. That compares to income of $159 million during the first quarter of 2015, or $.20 a share. Revenues for the first quarter of 2016 were $3.7 billion compared to $3.5 billion in the prior year.

Carnival raised its full year guidance to between $3.20 and $3.40 a share. The previous outlook was between $3.10 and $3.40 a share.
 

 · Carnival’s earnings

 
The earnings growth of these cruise lines is expected to remain strong as more people board due to the larger vessels coming on line. Low fuel prices and competitive pricing will play a role in the company’s maintaining strong balance sheets.




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Posted by Martin May 26, 2016
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These Retailers Should Be Avoided


Earnings season is coming to an end, but there is a sector that has a few companies that are still reporting and their numbers are very important because they show how consumers feel about spending.

The sector is retail. A handful of retailers reported this week, and of those, there are two that investors should steer clear of as their financial results for the quarter make it unlikely they will be able to turn around in the short term. They are Sears Holding Corp. (NASDAQ: SHLD) and Abercrombie & Fitch (NYSE: ANF).
 

 · The softer side fades

 
Sears’ performance continues to disappoint. It saw its sales in the first quarter fall to $5.4 billion from $5.9 billion for the same period in 2015. Its losses widened to $471 million from $303 million during the first quarter of 2016.

One of the problems is Kmart. Its same-store sales fell 5%. Sears has closed many of the Kmart stores, seemingly to no avail. I would champion selling off or closing the remaining stores, however Sears is taking a different route that may worsen its situations.

To stem the company’s overall losses, Sears is considering ways to monetize its most popular assets. They include its Kenmore, Craftsman and DieHard brands. The Sears Home Services repair business could also be done away with.

Plans entail using those assets the finance the company’s transformation strategy. It has closed a $750 million term loan, and together with a $500 million secured loan facility, it has $1.25 billion of committed financing. The goal is to enhance its liquidity.

“As we have consistently demonstrated, we will continue to take actions to adjust our capital structure and manage our business to enable us to execute on our transformation while meeting all of our financial obligations,” said the company’s chief financial officer.

It could also partner with other companies to expand the sale of its brands, which are now only sold in Sears and Kmart.

Also, the company, earlier this month, announced that it would open small appliance stores to compete with J.C. Penny, which recently began selling appliances again. That is a much better idea because it would allow the company to hold on to its most valuable assets.

The effects of the fickle teen market
When Abercrombie & Fitch came on to the retail scene, it popularized its brand with racy, sometimes offensive ads featuring scantily clothed teens. Now the company is struggling on its top and bottom lines, as it continues to face a variety of issues.

For the last quarter, its earnings per share loss were $.53, compared to analysts’ estimates of $.51. The company’s executive chairman said the results reflect “significant” traffic headwinds, particularly in international markets and in its U.S. flagship and tourist stores. He added that in the face of the headwinds, the company was encouraged by its U.S. business, where comparable sales improved in the Hollister brand, and its gross margin rate increased “meaningfully” for both brands.
 

 · The challengess

 
Stock performance for the retail sector is down almost 14% since the beginning of the year. Many assumed that retailers would benefit from the trickle-down effect of lower gas prices. It was thought that consumers would take those dollars and go shopping.

Well, they did…just not to the traditional retail shops. Amazon has grown to be a formidable player in the retail space as consumers choose it for their shopping needs. Amazon’s low prices and convenience in delivering services are two of the reasons it is thriving. While it took time for customers to warm up to online retailers like Amazon over brick-and-mortar companies, that has changed.
By the time brick-and-mortar retailers came around and began selling via the Internet or improving their websites, Amazon was well ahead in the game.

Also, it seems that consumers have become spoiled when it comes to how much they are willing to pay for items. If it’s not on sale, consumers are less likely to buy it. Even more attractive to consumers are discounters like those that make up The TJX Companies. One of the stores it owns is Marshalls, which does not offer sales at all. Still, you’d be hard pressed to not find one of their stores filled with customers on any given day.

Sears and Abercrombie & Fitch face the challenges that require long-term strategic plans to fix. At this point, I don’t see that happening this year. I would carefully review these stocks on their fundamental strengths and potential to greatly improve before investing in them.




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Posted by Martin May 24, 2016
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Ride Sharing Companies Are Needed Disruptors for Auto Industry


They may not be publicly traded – yet – but they seem to be all the rage these days.

I’m speaking of Uber and Lyft, which are garnering considerable attention from leading automakers looking to capitalize on their booming ridesharing services.

On Tuesday, the market learned that Toyota and Uber were collaborating. The reports noted that a deal is in the works that could lead to the Japanese automaker making an investment in Uber, the largest ride sharing service in terms of valuation.

These collaborations represent an exciting time for the once beaten down auto industry in which the so-called Big Three nearly went bankrupt a few years ago.
Collaborating with the ride sharing services does represent powerful opportunities for automakers, but there are nuances that investors should take into consideration before placing a lot of faith in the collaborations bringing meaningful shareholder value.
 

 · The players so far

 
The details of the agreement between Toyota and Uber, such as the amount of the investment, were not available at press time.
The reports of their collaboration come on the heels of agreements announced this year by Ford (NYSE: F) and General Motors (NYSE: GM). These agreements entail the companies working with Uber and its main competitor Lyft, with a main goal being to create driverless autos.

The space is already dominated by sophisticated tech companies like Google and Tesla that boast the software producing capabilities to operate self-driving cars.
Without teaming with the ride sharing service companies, the automakers are still capable of pursuing their efforts to build self-driving vehicles. However, by teaming with the leading ride sharing services, the companies have the chance to tap a fast-growing market that can piggyback on self-driving autos. This should help them to become more able to compete with Google and Tesla.
 

 · Coming back from the brink

 
It seems like it was just yesterday when Ford had to put up its Blue Oval as collateral for roughly $23 billion in loans it received from a syndicate of banks to keep it from filing for bankruptcy. That was in 2006, when the auto industry was in turmoil.

In 2009, GM did file for bankruptcy. It received roughly $80 billion in government bailout money.

Now, both automakers have recovered. Ford has its Blue Oval back and GM has paid back the government. The companies have reported growth in purchases of their vehicles, but their stocks have been range bound for the past five years. Ford has not managed to reach$18 a share; the closest it came was in 2014 when it traded around $17.42. GM has not been able to move above $50 a share. It nudged the number at the end of 2013 when it hit $40.99.
 

 · Disruptive action needed

 
As Ford, GM and other automakers were beginning to recover from their financial woes, they saw how Uber and Lyft were steadily carving out market share for their ride share services. Also Tesla and Google were making good strides with their self-driving car ideas. These tech companies were elevating the possibilities of vehicle transportation and automakers saw that they had to do something to avoid being left behind.

The mass production of self-driving cars would be the exact kind of disruptor needed in the automotive industry. It is still too early for auto makers to profit from such endeavors. But in the meantime, getting into the fast growing business of ride sharing is a good strategy.

So it is no wonder that we are seeing these agreements. GM invested a whopping $1 billion in Lyft, which boosted the second largest ride sharing service to $5.5 billion. Uber has received more than $10 billion in investments, and its valuation is now about $63 billion.

In addition to its investment in Lyft, GM bought another ride sharing service called Sidecar. Interestingly, the company’s founder said he shut down Sidecar’s operations and sell because it was unable to compete against Uber.
 

 · Ride sharers pulling out the stops

 
Uber is the largest, but Lyft is making considerable gains. Lyft has been able to do so through a series of actions, including aggressive marketing. For example, earlier this year, it offered 50% off rides in select markets. Uber has rolled out a VIP program for riders that take a minimum number of rides per month. Lyft recently announced a program unheard of mostly in the ride sharing space – allowing riders to reserve their trips in advance in certain markets. Uber, on the other hand, is testing a pilot that would penalize riders if they were late by more than two minutes in getting in their car once it has arrived.

Investors should understand that these types of competitive nuances may present challenges to automakers that have not had to deal with them before. How well the automakers are able to adapt is key.




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Posted by Martin May 24, 2016
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Tips On Managing Your Portfolio


We previously talked about how to get higher returns by investing in a peer to peer platform (P2P) instead of a traditional saving product offered by the banks.
 

However P2P is now a very mature industry. Gone are the days when there were just two to three peer-to-peer lending platforms. What started from Zopa has evolved into a whole industry of alternative finance.
 

There are many options in P2P, each doing business in a slightly different way. Some platforms only offer loans for personal finance, while others deal exclusively in businesses loans and loans for real estate development. You have quite a choice when deciding what to invest in.
 

If you are a mature investor, the question facing you is not where and how to invest, but rather how to build and manage an effective portfolio.
 

  1.  Understand your risk profile

    2. Risk is an inherent part of any business. An effective portfolio is one that gives you the returns you need. And to understand what you need, you need to understand your risk profile. Are you risk averse or you are willing to take high risk for extremely high returns, or are you somewhere in between the two extremes?
     

    There are platforms which give out loans to people with low credit scores and bad histories. These are usually low quality loans, meaning unsecured loans. However you may get as much as 17% per annum from these loans. On the opposite end of the spectrum are platforms which will give you a guaranteed return, but percentages start from a bare minimum of 3%.
     

    To make your portfolio truly effective you will need to find a balance. Find out what you can afford to lose and the bare minimum return you need to achieve.
     

    Also if you research effectively you will find platforms that pay a good return while having security features like provision funds or secured loans in place (loans given against security).

     

  2.  Diversify

    3. No matter what you invest in, diversification is extremely essential. The age old saying, “Do not put all your eggs in one basket” holds very true when building an effective investment portfolio.
     

    Diversification works two ways when talking about investments in a peer to peer lending platform. First you should invest the bulk of your investment in one P2P platform. The second is a bit more complicated. Many P2P platforms automatically distribute your investment over a large number of loans, but in some platforms you yourself choose which loans to invest in.
     

    When you are manually selecting loans to invest in you have to take care of two things. Do not invest the bulk of your investment in one single loan and when spreading the investment over different loans, ensure that they are “different types of loans”. For example, some platforms like Landbay offer secured loans for buy-to-let mortgages. Others like Zopa are peer to peer lending platforms for personal loans. In times of recessions, the demand for personal loans may go down and there is a good chance people with funds may choose to invest in property.

     

  3.  Research

    4. The sage of Omaha is what he is because he does not trust his gut, instead he undertakes effective research.
     

    Let me give you an example of effective research. A few years back, Saving Stream was launched. Saving Stream is a pretty good platform giving a fixed return of 12% per annum. However back then a few investors online researched it so well they found out that its online banner ads had used a stock photo of a person and under that photo was a review by an investor singing praises of Saving Stream. It turned out the stock photo was a blunder but the review was real. Saving Stream finally got a good developer for their website and is doing great now. The point of the story is that those researchers went through everything before investing their money. That is how thorough you should be if you want good returns.




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Posted by Martin May 23, 2016
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Cybersecurity on Deck; Palo Alto Earnings Out This Week


Cybersecurity continues to grow as a concern for individuals, businesses and government entities as the world increasingly performs daily activities electronically. A host of companies have formed to deal with cybersecurity, and if you play your cards right, you may find one, or more that make for solid investment choices for your needs.

Services provided by cybersecurity companies include providing protections to companies’ networks through the use of firewalls, providing cloud storage protections, and preventing e-mail viruses. Most appealing is their ability to stop hackers.

While several of these companies are thriving due to the services they provide, many are suffering from the various costs of doing business. If you want to invest in the space, pay attention to the risks that each of them possess.

The problems range from skyrocketing stock options for employees, to declines in customer demands. These problems can cause the revenues of companies that operate in the space to fluctuate. In fact, many see cybersecurity as being one of the most volatile spaces within the tech sector.

Considering the needs for their services and products, cybersecurity companies are making plenty of money. Furthermore, there is plenty of money to be made. According to Markets and Markets, the global cyber security market size is estimated to grow from $106.3 billion in 2015 to $170.2 billion by 2020, at a Compound Annual Growth Rate (CAGR) of 9.8%.

Of the companies that provide cybersecurity services, Palo Alto (NYSE:PANW) is one that has managed to give investors the most fits. For the past seven quarters, its sales have grown by at least 50%. On that same note, its earnings per share are not doing so well. They are negative $2.29. Of some of its competitors like Barracuda Networks (NYSE:CUDA) and Fortinet (NASDAQ:FTNT), Palo Alto’s EPS is the worst. For example, Barracuda’s EPS is negative $0.08 and Fortinet’s EPS is $.02.

The street expects Palo Alto to report earnings of $339.4 million for the third quarter of 2016 and $.41 in EPS. That would be an impressive increase of 45% and 78%, respective over the same period in 2015. It reports on Thursday.

Observers point out that this is likely the first quarter in at least two years where any sort of slowdown has been detected in Palo Alto’s demand.

Like most observers of Palo Alto, I would not make it a short-term play. Go long, and be ready to weather the ups and downs from its fluctuating revenues and expense pressures.

A good short-term play is Barracuda. Its stock is up more than 4% over the past month, reflecting growing interest in the stock. Zacks points out that Barracuda’s consensus estimate trend has also increased, from $.04 cents per share 30 days ago to $.09 cents per share as of Friday. That’s an impressive increase of 55.6%.

Fortinet has been singled out as a winner in the space by Barron’s due to the company’s ability to help its clients manage their existing technology, and offer protection on multiple fronts. Barron’s noted that Fortinet is up 37% since it recommended them nearly three years ago in a report looking at the industry.

There is an ETF that contains several security software companies whose performance also reflects the fact that the security sector is starting to show signs of slowing. The slowing is based on the guidance that was provided for the second quarter of 2016, as well as full year guidance by cybersecurity companies. The ETF is called the PureFunds ISE Cyber Security or HACK, and the fund is down more than 30% since last year.

Given the demand for their services, cybersecurity companies stand to make billions in the coming years. The key for them is to be able to handle the expenses of providing their services without damaging their top and bottom lines.




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Posted by Martin May 20, 2016
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Newspaper Industry is Not Dying; Just Not Investable?


The newspaper industry has experienced steep declines in sales over the past few decades, causing them to be less attractive in the eyes of investors.

Many newspapers have merged, or have been acquired, while others have simply gone out of business. I took a look at a few of the larger companies, and came away with mixed feelings. While their efforts to improve are positive, their financials still are worrisome.

Let’s take a look at some of the happenings in the industry right now.

 

 · Gannett

 

First up is Gannett (NYSE: GCI), the publishing company that owns USA TODAY. Look no further than the buying binge that it’s been on to see that it is well capitalized as a force in the industry.

Gannett has completed several impressive acquisitions of newspapers throughout the country. They include buying Journal Media Group, which owned the Knoxville News Sentinel, The Commercial Appeal in Memphis, and 13 other newspapers in Tennessee.

Now Gannett has set its sights on Tribune Publishing Company (NYSE: TPUB), which owns the Chicago Tribune, the Los Angles Times and the Orlando Sentinel. Gannett is facing a problem in acquiring Tribune Publishing, however – Tribune Publishing has declined several offers.

The latest offer is $15 per share, which represents a 99% premium to the $7.52 closing price of Tribune’s common stock on April 22, the last trading day before Gannett publicly announced its initial offer for Tribune Publishing. That values Tribune Publishing at roughly $864 million.

On Friday, Gannett sent Tribune shareholders a letter asking them to send a “clear and coordinated message” to their Board that “they expect superior and certain value for their shares and that the Tribune Board should substantively engage immediately with Gannett regarding Gannett’s offer to acquire Tribune for $15.00 per share in cash.

Tribune shareholders will meet on June 2.

When Gannett reported its first quarter revenues for 2016, operating revenues for the quarter were $659.4 million compared to $717.4 million in the prior year, a decrease of $58 million or 8.1%.

It was able to boost digital-only subscriptions by 37%. The company is also enjoying revenue from diversified businesses. That it has acquired and that includes Cars.com and CareerBuilder.com

As far as guidance, the company said it expected full year revenue trends to improve over 2015 driven largely by growth in digital. Advertising revenues were expected to decline in the 5% to 7% range and circulation revenues were expected to decline in the 2% to 4% range.

So while I think Gannett is among the strongest in the business considering its ability to make acquisitions, it will be important to pay attention to how these efforts affect its top and bottom lines.

 

 · Tribune Publishing

 

On Friday, Tribune Publishing said that Gannett’s statements are misleading. On that same note, Tribune says it is studying the $15 per share offer.

Tribune Publishing boasted $398.2 million of revenue during Q1 2016, which was flat compared to $398.3 million of revenue generated during Q1 2015.

It did suffer from a slip in advertising revenues, which were down 4.4% to $215 million. Circulation revenues of $122 million were up 11.4% in the quarter compared to the prior-year quarter and increased 1.7% from last year. Total digital revenues for Q1 2016 were $55 million, which was an increase of 15% from the prior-year quarter.

Tribune CEO Justin Dearborn said the first quarter results were driven by good momentum in digital and increased circulation revenue offset by a decline in advertising revenue.

To deliver value to shareholders, Dearborn noted that the company was at the “very early stages” of executing its plan to transform the company by increasing monetization of its “important” brands, capitalizing on the global potential of the LA Times, and significantly accelerating the conversion of content to revenue through an enhanced digital strategy.

However, of note is that the company’s second largest shareholder, Oaktree Capital, disagrees with that strategy. The company’s vice chairman, John Frank, noted in a letter, that the turnaround plan is risky and far behind those of competitors in the media business. Saying that the turnaround plan could destroy shareholder value, Oaktree wants Tribune to accept Gannett’s offer.

 

 · News Corporation

 
News Corporation (NASDAQ: NWSA), which owns The Wall Street Journal, also suffered from a decline in advertising revenues.

It reported its Q3 2016 earnings for the quarter ending March 31 on May 5. Its revenues were $1.9 billion compared to $2 billion for the same period in 2015.
I’d keep an eye on News Corp. because I think its diversification of revenue streams will help mitigate the effects of lower advertising revenue. At the forefront for it is are efforts to improve and expand its digital properties.

 

 · In conclusion

 

Companies that own newspapers, but that also have diversified products, should be viewed more favorably than those that simply own newspapers. Depending solely on the revenues from newspapers (that are more likely to be used to line bird cages) is a recipe for more disaster for publishing companies. If you sample the newspapers that have gone by the wayside, you’ll likely find that they relied heavily on subscriptions and ad revenue.

Relying on subscriptions is very dangerous considering consumers are cancelling them in droves as they can find their news online. Take the dust up over Facebook this week from critics saying the social media site was blocking conservative news. Newspapers don’t have to be a dying breed. Their owners just have to find other revenue streams, such as those from digital products, and even other businesses, to deliver the best in shareholder value.




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Posted by Martin May 19, 2016
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Charter Eyeing MVNO Launch After Time Warner Buyout Closes


Charter Communications (NASDAQ: CHTR) this week officially closed its deal in acquiring Time Warner Cable and Bright House. The natural thought is on how this deal will affect the cable industry. However, there is another benefit that Charter considered in buying Time Warner and it is called an MVNO, and it could be just as profitable than the cable business.

Companies in the wireless space know that investors in their stock are curiously interested about MVNOs and how companies will maximize their use of it. Considering how crowded the wireless space is, anything that a company does to make their services more attractive will add to their bottom lines. That is why investors are looking at MVNOs, or at least they should be.

 

 · MVNO defined

 
An MVNO (Mobile Virtual Network Operator) is a mobile service that operates without its own licensed spectrum, and it may not have the infrastructure to provide mobile service to its customers, according to Webopedia. So basically MVNOs do not own the network on which they provide voice and data traffic. MVNOs lease wireless capacity from pre-existing mobile service providers and establish their own brand names that are different from the providers.

Think Virgin Mobile, which uses Sprint (NASDAQ: S) as its underlying carrier. Virgin Mobile is the MVNO.

Back in 2011, Verizon (NYSE: VZ) saw that there were players in the market that had a high-quality radio spectrum called AWS-1, which is used for data, voice, video and messaging. Those companies included Bright House Networks, Comcast (NASDAQ: CMCSA), Cox and Time Warner. The companies teamed up and Verizon entered into an agreement to purchase their spectrum.

It is clear that Charter, and any other player in the wireless space that’s worth their salt, understands the value of spectrum. According to FierceWireless, Charter’s CEO Tom Rutledge said at a conference this week that his company can now potentially offer a nationwide wireless service because its Time Warner acquisition gives it access to the same Verizon MVNO agreement as Comcast.
 

 · Comcast working on MVNO

 

Now that we’ve gotten all of the technical stuff out of the way when it comes and spectrum’s importance, let’s take a closer look at how getting it can help these companies take more market share in one of the most competitive industries around.
All eyes are on Comcast right now as it is expected to introduce its own mobile service, perhaps by the end of the year.

In some circles, Comcast is the industry darling in terms of launching an MVNO service right now because it can largely fulfill the main thing that investors want – capital efficiency. It is estimated to have more than 13 million WiFi hotspots. Other contenders may have considerable costs to incur in developing that many WiFi hotspots to compete with Comcast.

 

 · And then there’s Charter

 
One of the things I found interesting about Charter’s $66 billion acquisition of Time Warner and Bright House is how it positioned it to be able to make its move into the wireless market…right alongside Comcast. While the company has not outright said it will enter the space, documents from the Federal Communications Commission about the acquisition, which were released May 10, tell another story:

“The applicants contend that the transaction would enable New Charter to be a new entrant in the mobile wireless market by offering mobile products through increased WiFi deployment, the deployment of licensed spectrum or a mobile virtual network operator (MVNO) arrangement – and likely through some combination of these.”

As an investor, I would definitely keep an eye on Charter as another player in this growing, and potentially area of wireless offerings. If it does enter the arena, it could effectively compete with Comcast. This is especially the case since the acquisition gives it a considerable number of Wi-Fi hotspots.

At the meeting that I noted above that FierceWireless covered, Rutledge said this.
“In my view, we’re already a wireless company,” adding that a good amount of data is already transmitted wirelessly by customers to Charter’s network.
 

 · Others to watch

 

The market had anticipated last year that Apple (NASDAQ: AAPL) would launch its own MVNO, but it denied it then and seems to still have no intentions of launching one. Google (NASDAQ: GOOGL) has launched an MVNO service. It leases network capacity Sprint (NYSE: S) and T-Mobile (NASDAQ: TMUS).




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