• Twitter Priced at $26 per Share
    Posted by on November 6th, 2013 at 9:56 pm

    Twitter ($TWTR) will start trading tomorrow. The company will debut on the NYSE under the symbol TWTR. The underwriters have announced a price of $26 per share. That values the company at $14.2 billion.

    Everyone on Wall Street has their fingers crossed on this one since the Facebook ($FB) IPO was a bit of a flop. Trading was delayed and the stock didn’t do well for several weeks. I suspect that FB wasn’t well advised by their bankers. Also, I think they got greedy. Twitter seems to be avoiding these mistakes.

    Twitter is selling 70 million shares to the public so it will raise $1.82 billion for the company. I strongly suspect that the price will pop once the shares hit the market.

    So is Twitter a good buy? The heck if I know.

    With investing, I rely on the fundamentals of a business. One of the limits of fundamental analysis is that it assumes the general stability of the business environment. With a company like Twitter, that environment is far from stable. I can make a pretty good guess as to what Harris will look like in three years. But with Twitter, I have no earthly idea.

    Twitter is currently losing money, and it will continue to do so. If things go well, they may turn a profit by 2015. Again, that’s if things go well. At $26 per share, twitter is being valued at 12.4 times next year’s estimated sales. Facebook currently trades at 11.6 times 2014 sales, and LinkedIn is at 12.2 times. That’s a rich valuation.

    Until I can see a consistent positive cash flow stream from Twitter, I’m staying far away from this stock. That’s not a moral judgement against the stock. I wish them well. But for my kind of investing, I never take risks I don’t have to.

  • Maybe Mulally Is Going to Microsoft
    Posted by on November 6th, 2013 at 3:29 pm

    Microsoft ($MSFT) has been doing well lately and Ford ($F) hasn’t. Apparently, there’s an obvious connection: speculation that Ford CEO Alan Mulally will depart the automaker for the top spot at MSFT.

    I’ve been a doubter on that story, but it got a major boost today when Rick Sherlund, an influential analyst at Nomura, said it’s likely.

    From Jay Yarow at Business Insider (h/t @soonerstocks):

    Inside Microsoft, Sherlund is well-respected as one of the few analysts that really understands the company.

    In his report today, he says it’s likely that Alan Mulally, the CEO of Ford, will be named as Microsoft’s CEO by December.

    While internal candidates like Stephen Elop and Tony Bates are being kicked around, Sherlund says he does not believe they are seriously in the running.

    He says other top candidates likely include Boeing CEO James McNerney, Jr. and ex-Motorola COO Edward Breen. Those are two names we’ve never heard before.

    Additionally, he reports Microsoft has been trying to woo Paul Martiz, a former Microsoft employee who was running VMWare.

    Sherlund says Mulally/Maritz would be a dream team. Maritz would be Microsoft’s head of software/products and Mulally as CEO/operator. If it helps, think of Tim Cook and Jony Ive. A similar division between operator and visionary.

    Furthermore, Sherlund thinks MSFT should sell off Bing and Xbox, buy out Ballmer’s stock for $12 billion, and finally:

    Build out Azure, the cloud platform that rivals Amazon.

    Make sure its enterprise software works across platforms. Office needs to work on Android and iOS to compete with Google’s apps which are growing.

    Skype and Yammer are not being taking advantage of. Microsoft should do more with both.

  • Microsoft Breaks $38
    Posted by on November 6th, 2013 at 12:11 pm

    For the first time in 12 years, Microsoft ($MSFT) is trading north of $38 per share. (I should mention their gigantic $3.08 per share dividend in 2004.)

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    The latest word is that MSFT had narrowed down its list of candidates to be new CEO to five names. Alan Mulally is on the list but I don’t think he’s a serious contender.

  • Cognizant’s CEO on CNBC
    Posted by on November 6th, 2013 at 10:05 am

  • Morning News: November 6, 2013
    Posted by on November 6th, 2013 at 6:15 am

    China’s Leaders Confront Economic Fissures

    Euro Zone Money Markets Returned to Growth in Second Quarter

    U.K. Production Rises More Than Forecast on Factory Rebound

    24-Hour General Strike Shuts Down Services Across Greece

    Brent Crude Traders Claim Proof BFOE Boys Rigged Market

    The House GOP Dials a Wrong Number on the Chained CPI

    Toyota Raises Profit Forecast After Abe Helps Weaken Yen

    Twitter Raises Price Range for Its I.P.O.

    Samsung Elec Vows More Aggressive Investment, Targets Tablets

    ING to Complete Restructuring in 2016 Ahead of Schedule

    Office Depot Announces Third Quarter 2013 Results

    Bitcoin Is Going On An Astronomical Tear

    Here’s How Companies Are Using Their Massive Piles of Cash

    Roger Nusbaum: Helaine Olen (Kind Of) Takes Down Dave Ramsey

    Credit Writedowns: Financial Obligations Rising for Renters, Falling for Homeowners

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  • DirecTV Earns $1.28 Per Share
    Posted by on November 5th, 2013 at 8:00 am

    DirecTV ($DTV) just reported Q3 earnings of $1.28 per share, which was 26 cents more than consensus. In the U.S., DirecTV added 139,00 subscribers which doubled expectations. This is happening at the same time that Time Warner and Comcast are hemorrhaging subs.

    “DirecTV didn’t give customers any reason to cancel in terms of blackouts or anything like that,” said Brean Capital analyst Todd Mitchell. “DirecTV has been good at picking up customers after blackouts.”

    Shares of DirecTV rose 2.5 percent to $66 in trading before the market opened.

    ISI analyst Vijay Jayant said the low churn could be because of the company’s exclusive National Football League Sunday Ticket package, which lets DirecTV customers watch out-of-market games every Sunday. Promotion for that product ramped up in the third quarter.

    Net income attributable to DirecTV was $699 million, or $1.28 per share, compared with $565 million, or 90 cents share, a year earlier.

    Excluding a fee settlement and other special items, earnings came to $1.13 per share, which beat the analysts’ average estimate by 12 cents, according to Thomson Reuters I/B/E/S.

    Revenue rose 6 percent to $7.88 billion, narrowly exceeding analysts’ estimates of $7.84 billion.

    In Latin America, DirecTV added 260,000 subscribers, while StreetAccount was looking for 371,900.

  • Cognizant Beats and Raises Guidance
    Posted by on November 5th, 2013 at 7:29 am

    Nice quarter for Cognizant Technology Solutions ($CTSH). The company earned $1.13 per share which was three cents more than expectations. Quarterly revenues rose 21.9% to $2.31 billion, $50 million more than consensus.

    Best of all, CTSH raised full-year guidance from $4.32 to $4.37 per share. Full-year revenue is expected to be at least $8.84 billion, which is an increase of 20.3% over last year.

    “We delivered yet another quarter of industry-leading growth that was broad-based across our portfolio of industries, services and geographies,” said Francisco D’Souza, Chief Executive Officer. “The sheer velocity of change in the industries we serve is driving the C-suite to challenge the status quo and rethink their business models to be relevant for the future. Our investments across multiple horizons of growth position us well to deliver differentiated value as we partner with clients in this journey.”

    “Our performance during the quarter was stronger than anticipated due to a faster ramp up in demand for outsourcing services and strong discretionary spend on consulting and technology services,” said Gordon Coburn, President. “Our continuous reinvestment in our business continues to help us strengthen our capabilities to address our clients’ dual mandate of driving greater performance in their current businesses, while positioning them better for future success.”

  • Morning News: November 5, 2013
    Posted by on November 5th, 2013 at 6:11 am

    BOJ Struggles to Convince on 2% As Abenomics Shine Fades

    EU Trims 2014 Eurozone Growth Forecast to 1.1%

    Italian Banks Are Near Their Saturation Point on Government Debt

    China Premier Warns Against Loose Money Policies

    Vivendi Agrees €4.2 Billion Deal with Etisalat for Maroc Telecom

    Fed’s Bullard: $1 Trillion a Year QE Pace ‘Torrid’

    Gold Bug Schiff Counters Goldman on First Drop Since 2000

    Gas and Food Prices Have Hit Their Lowest Levels of the Year

    Twitter IPO More Expensive Than Facebook Without Profits

    BlackBerry Comeback Hampered by Vanishing Cash

    Gross Loses World’s Largest Mutual Fund Title to Vanguard

    SAC Agrees to Plead Guilty to End Insider-Trading Case

    J&J to Pay $2.2 Billion in Drug Marketing Penalties

    Jeff Carter: The Key To Startup Success

    Joshua Brown: Lifestyle ETFs and Investment Products Based on Belief Systems

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  • Damn It Feels Good to Be a Stock Picka
    Posted by on November 4th, 2013 at 5:30 pm

    Reuters notes that now is a good time to be a stock picker. While active managers usually lose to the market, it’s not happening this year. Of U.S. fund managers, 57% are beating their benchmarks this year. That’s their best showing in four years.

    Implied correlations – a measure of how closely the performance of individual stocks mirrors that of the index itself – have fallen to their lowest since October 2007 after peaking in 2011, according to a research note from Cantor Fitzgerald. That means that instead of the returns of most stocks clumping close to the index returns, there is a much broader spread on how individual shares are performing.

    That’s a sign that investors are picking winners and losers. It also suggests the bull market – which has carried the S&P nearly 170 percent higher since March 2009 – is starting to show its age. The S&P 500 has set 33 new highs this year after failing to reach record levels since 2007. Now there are fewer beaten-down stocks that offer the chance for a quick pop higher.

    Instead of searching for screaming bargains, fund managers are turning their focus to well-run companies that have sustainable advantages and may hold their value during a downturn, however unlikely that may seem at the moment.

    Of the S&P 500, the most stocks are positive YTD since at least 1980. This rising tide has lifted a heckuva lot of boats.

  • Is the Small-Cap Rally Already Over?
    Posted by on November 4th, 2013 at 12:54 pm

    The Russell 2000 has outperformed the S&P 500 for a remarkable 14-and-a-half years. The index reached a low relative to the S&P 500 on April 8, 1999. It’s interesting to see how the little guys were largely left behind in the big rally of the late 1990s.

    Ever since then, the Russell has consistently outperformed the broader market. If the S&P 500 had kept pace with the Russell, it would be over 3,600 today. The most recent relative performance high came on October 1 of this year.

    Since then, the small-caps have badly lagged and it got much worse last week. The Russell 2000 has underperformed the S&P 500 for the last six days in a row. Historically, these outperformance/underperformance cycles have run on for several years.

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