10/5/10
Consensus earnings growth does not justify share price for AAPL, AMZN, NOK, VMW, or CRM
9/24/10
The New Normal: 10 Themes and Their Implications on the American Economy (Part 3) Media Saturation
On September 17th I introduced 10 themes that we see as having significant impact on the future of the US economy. Along with the a description of the theme, I include what "The New Normal" could look like, along with the possible risks and opportunities for investors. Here is the third theme of ten.
3. Media Saturation
3. Media Saturation
9/21/10
Why MSFT ORCL RIMM VMW and HP will continue to post solid results.
We have been building a thesis that, regardless of the recent deceleration of economic growth in the US economy, the enterprise IT sector is on a bit of a roll that should persist for the next several quarters. Investors may want to look at business/enterprise IT technology for overweighted returns. Please note that 26% of the aggregate market cap of the sector is in cash and/or equivalents.
RIMM, MSFT, ORCL, VMW, and HP all reported better than expected results, and all presented fairly positive outlooks. Although CSCO met expectations, its outlook was positive. Our channel sources confirm that American business is investing in productivity at the desktop, in the pocket, and in the back office.
RIMM, MSFT, ORCL, VMW, and HP all reported better than expected results, and all presented fairly positive outlooks. Although CSCO met expectations, its outlook was positive. Our channel sources confirm that American business is investing in productivity at the desktop, in the pocket, and in the back office.
9/20/10
The New Normal: 10 Themes and Their Implications on the American Economy (Part 2) Tax Inequity
In my previous post I introduced ten themes that represent a "new normal" for the American economy as it continues to exit from the 2007-2009 recession. Evidence suggests that the potentially greatest impact on the economy, and the first theme of the "new normal" is simple demographics. Baby Boomers are getting older, wealthier, more cautious, and more powerful than ever as a cohort. To them its now about assets not equity; dividends not growth. If the United States recovers to maintain its economic leadership, its largest cohort will likely need to behave differently than any other previous cohort at a similar life stage and throw caution to the wind. More than ever, the American economy needs investment in new ideas, new business models, and the skills of its diminishing workforce in order harness American ingenuity to actually grow its economy. This is not likely to happen because Baby Boomers have accumulated vast wealth and they are unwilling to part with it for any reason.
The second theme is related to the first.
2. Tax Inequity
The second theme is related to the first.
2. Tax Inequity
9/17/10
The New Normal: 10 Themes and Their Implications on the American Economy (Part 1)
History clarifies the present and that won’t happen until it’s too late. In the meantime, we are left trying to make economic sense of this messy human condition in real-time. At no point in history has the mess been more interconnected and complex than it is today. Those that are able to distill situations and make effective decisions in real-time are most likely to succeed, and then there is the other 99% of us.
Investors can no longer easily “peel back the onion” to uncover fundamental risks and opportunities and act upon them. There are just too many onions and they are appearing at faster rates, compressing the available time to uncover, solve, and act upon opportunities. And even as the onions are peeled, sometimes they turn into completely different vegetables.
No wonder investors are hiding under their desks right now. They are being pummeled by data, commentary, opinion, and opinion disguised as data from everywhere and continuously. Not all of the data is valuable, valid, or unbiased, which makes it difficult to make objective decisions. Hence, we see low volume and high volatility in equity markets.
In an effort to decipher secular and objective trends and events which could impact the performance of companies that I cover for my clients, I have been scouring for objective research and data that can provide some backdrop to the recommendations that I make.
For the most part, I cover small cap technology stocks. At no time in recent history have technology companies had as much money on their balance sheets, and at no time have these companies traded at a discount to the main index, despite showing 15% growth in earnings year-over-year. Among technology bellwethers, nine out of ten reported earnings growth last quarter, six out of ten beat estimates and 7 guided higher. Prior to 2008, this would have represented a fairly significant move up for the NASDAQ and a perceived buying opportunity. For Q2 2010, it represented a meaningful move down for most of those same stocks. Behavior that I have taken for granted over the past two decades did not occur, which leads me to believe that there are new fundamental drivers and conditions affecting the market. In other words, there appears to be a “new normal” emerging from this recession that is impacting not only the narrow band of technology stocks that I follow, but also the broader economy. The trends are sobering. However, as a generally optimistic individual, I am hopeful that Americans will find a way to alter their path. The world economy will depend upon it.
I have organized the New Normal into ten themes. Within each theme, I attempt to identify the risks, opportunities, and investment sentiment. Without changes to policy that could alter the present course, the overall indicators are that the United States appears to be entering a period of persistent low economic growth with high volatility and increasing polarity between rich and poor. As with all things, Americans have the ability to alter course. The interesting question is whether they have the will to do so.
Here are the 10 themes:
1. Demographic Shift
2. Tax Inequity
3. Media Saturation
4. War(s)
5. Education Deficit
6. Health Deficit
7. Innovation Deficit
8. Debt
9. Accountability & Ethics
10. Political Intractability
Investors can no longer easily “peel back the onion” to uncover fundamental risks and opportunities and act upon them. There are just too many onions and they are appearing at faster rates, compressing the available time to uncover, solve, and act upon opportunities. And even as the onions are peeled, sometimes they turn into completely different vegetables.
No wonder investors are hiding under their desks right now. They are being pummeled by data, commentary, opinion, and opinion disguised as data from everywhere and continuously. Not all of the data is valuable, valid, or unbiased, which makes it difficult to make objective decisions. Hence, we see low volume and high volatility in equity markets.
In an effort to decipher secular and objective trends and events which could impact the performance of companies that I cover for my clients, I have been scouring for objective research and data that can provide some backdrop to the recommendations that I make.
For the most part, I cover small cap technology stocks. At no time in recent history have technology companies had as much money on their balance sheets, and at no time have these companies traded at a discount to the main index, despite showing 15% growth in earnings year-over-year. Among technology bellwethers, nine out of ten reported earnings growth last quarter, six out of ten beat estimates and 7 guided higher. Prior to 2008, this would have represented a fairly significant move up for the NASDAQ and a perceived buying opportunity. For Q2 2010, it represented a meaningful move down for most of those same stocks. Behavior that I have taken for granted over the past two decades did not occur, which leads me to believe that there are new fundamental drivers and conditions affecting the market. In other words, there appears to be a “new normal” emerging from this recession that is impacting not only the narrow band of technology stocks that I follow, but also the broader economy. The trends are sobering. However, as a generally optimistic individual, I am hopeful that Americans will find a way to alter their path. The world economy will depend upon it.
I have organized the New Normal into ten themes. Within each theme, I attempt to identify the risks, opportunities, and investment sentiment. Without changes to policy that could alter the present course, the overall indicators are that the United States appears to be entering a period of persistent low economic growth with high volatility and increasing polarity between rich and poor. As with all things, Americans have the ability to alter course. The interesting question is whether they have the will to do so.
Here are the 10 themes:
1. Demographic Shift
2. Tax Inequity
3. Media Saturation
4. War(s)
5. Education Deficit
6. Health Deficit
7. Innovation Deficit
8. Debt
9. Accountability & Ethics
10. Political Intractability
6/21/10
iLOOKABOUT (ILA.V): Deploys a transformative contract - investors should take note
iLOOKABOUT is about to benefit from a significant software service being rolled out to the insurance industry in Ontario. The solution is called iClarify and will be available to about 700 broker offices in the province by the end of June. The deployment comes on the heals of a successful 30-day pilot where 37 broker offices generated approximately 40,000 queries over that timeframe. We believe that iLOOKABOUT should generate somewhere between $1.00 and $4.00 per query as the solution goes live. Ontario alone should have as step function impact on both revenue and earnings starting this quarter (which is fiscal Q3). Its solution partner SCM announced that both Quebec and British Columbia launched pilots for June. Investors could infer that, if the BC and PQ pilots show similar metrics to Ontario, then there is a good possibility that these provinces will be soon rolled out.
Notwithstanding, the revenue and earnings impact of the iClarify project to iLOOKABOUT is not currently priced into the stock. Please see my initiating report on behalf of MPartners published earlier this month.
I do not own shares of ILA.
Notwithstanding, the revenue and earnings impact of the iClarify project to iLOOKABOUT is not currently priced into the stock. Please see my initiating report on behalf of MPartners published earlier this month.
I do not own shares of ILA.
MPartners RES Small Cap Tech Sector - June 15
See the slide show of Small Cap Tech Sector performance as of June 15th.
5/4/10
Mpartners RES Canadian Small Cap Tech Index - April
Published for institutional investors earlier today. The bottom line is that small cap technology stocks have demonstrated 12.5% better YTD returns than the main index. Even with solid returns so far this year, the Small Cap Tech Index is still trading at an earnings discount to the main index, inferring that there remains future upside. During April, approximately $92M in capital was raised, with OTC making two acquisitions. OTC bought Nstein for approximately $32 M, and then followed up later in the month with an acquisition of Burntsand for approximately $12M.
Various sources continue to call for a secular bull market for the technology sector due to a current IT replacement cycle, and the emergence of the mobile web which could be up to five times the size of the fixed line internet measured in terms of users.
Various sources continue to call for a secular bull market for the technology sector due to a current IT replacement cycle, and the emergence of the mobile web which could be up to five times the size of the fixed line internet measured in terms of users.
Commentary on BNN regarding RKN, BWC and SVC
On Friday April 30th, at 3:15, I was guest on BNN discussing three mobile ecosystem companies that I initiated official coverage on with Mpartners.
The investment concept is this: mobile operators worldwide are experiencing a data capacity and congestion crisis that is expected to get exponentially worse over the coming five years as web enabled smartphones proliferate the market. Even with significant network capacity upgrades, operators will continue to run up against capacity challenges and quality of service issues. Network optimization solutions will be required to help more efficiently manage how data is used in order to offset the expenses associated with network upgrades. With smartphones using 40 times more data than a typical feature phone, 10 million web enabled smartphones use as much data capacity as 390 million feature phones. According to Cisco, mobile data capacity requirements are forecasted to grow at a parabolic CAGR of 108% over the next four years. At the same time, subscriber ARPU is forecasted to grow at a CAGR of only 10%. As a result, mobile operators will struggle to grow profitably as they support popular smart phone devices like iPhone and Android platforms.
Investors can benefit from this problem by participating in the upside potential of the three software-oriented mobile infrastructure stocks that I mention in the clip. Often complimentary, sometimes competitive, each company plays at a different level within the stack from billing (RKN) to policy (BWC) to network awareness (SVC). Here is the link.
http://watch.bnn.ca/trading-day/april-2010/trading-day-april-30-2010/#clip296311
To return to RES Free Thinking, please click on the back button of the browser window in which the clip plays.
The investment concept is this: mobile operators worldwide are experiencing a data capacity and congestion crisis that is expected to get exponentially worse over the coming five years as web enabled smartphones proliferate the market. Even with significant network capacity upgrades, operators will continue to run up against capacity challenges and quality of service issues. Network optimization solutions will be required to help more efficiently manage how data is used in order to offset the expenses associated with network upgrades. With smartphones using 40 times more data than a typical feature phone, 10 million web enabled smartphones use as much data capacity as 390 million feature phones. According to Cisco, mobile data capacity requirements are forecasted to grow at a parabolic CAGR of 108% over the next four years. At the same time, subscriber ARPU is forecasted to grow at a CAGR of only 10%. As a result, mobile operators will struggle to grow profitably as they support popular smart phone devices like iPhone and Android platforms.
Investors can benefit from this problem by participating in the upside potential of the three software-oriented mobile infrastructure stocks that I mention in the clip. Often complimentary, sometimes competitive, each company plays at a different level within the stack from billing (RKN) to policy (BWC) to network awareness (SVC). Here is the link.
http://watch.bnn.ca/trading-day/april-2010/trading-day-april-30-2010/#clip296311
To return to RES Free Thinking, please click on the back button of the browser window in which the clip plays.
4/16/10
Why Investors Should Look at TSX/V Small Cap Tech
Here is a slideshare presentation of a research piece that I wrote for MPartners earlier this week.
3/10/10
Cisco's Cr-3 Router - Streaming Media Players Drool
Cisco's CR-3 322 Terabyte carrier-grade router is three times faster that its predecessor CR-1 router. Not certain if this is a "change the Internet forever" product. However, it may be a tipping point for rich media providers if it is well adopted by carriers. Considering that carriers are constantly scrambling to keep up with capacity demand, its probably a very good possibility that sales of this $90,000 router will be brisk.
John Chambers hyberbolic messaging around the capabilities of the router focused on the benefits to rich media (in particular video), which has been clogging pipe for years. The scenario painted is massively available rich media streamed from the cloud. Basically, consumers and business everywhere will be able to access rich, high quality media streamed to any device at any time from the cloud with DRM protection on content.
The most obvious immediate beneficiary of this evolving content model is Netflix (NFLX), which would immediately benefit from a streamlined distirbution model for rented movies. Clearly, large media conglomerates that create and manage content would also benefit, as would content originators like sports leagues, musicians, and entertainers. So too would the surrounding ecoystems.
There are several Canadian technology companies that could immediately benefit from the network capacity gains offered by the CR-3 router. These three come to mind:
Intertainment (INT:TSXV) is a micro-cap media company that appears to have caught lightning in bottle with its Itibiti desktop streaming media widget. With NBC as an anchor customer, and with Microsoft choosing it as a reference Silverlight 4.0 deployment, Intertainment is building an influential client fan base for its always on widget. Using the widget, NBC streams content continuously to users while disintermediating the browser. By disintermediating the browser, fans can get entertained in fewer steps, and there is less chance that NBC has to pay Google for the privilege. A big win for NBC, and a big win for Microsoft's media business.
Neulion (NLN:TSX) is a small -cap media company and successor to JumpTV that operates online rich media sports programming for hundreds of NCAA schools, NHL, NFL, and MLS sports leagues. improved capacity for streaming media creates substantial opportunities for live data mashups, playlists, highlights, and rich easy-to-access inventoy of game footage and data. Increased capacity delivers more accessibility and more packaging, which delivers more revenue.
Fluid Music (FMN:TSX) is a small-cap media company that has amassed a low-cost royalty song portfolio. It utilizes multiple distribution and packaging methodologies to generate profits from the millions of songs in the catalog including: background music, packaged lifestyle music and consumer digital downloads via Puretracks. Actually, most of Fluid Music's $90 m in annualized revenue is generated from a small percentage of the total catalog. Although the music industry is on the forefront of streaming media, increased network capacity enables DRM compliant distribution, swapping, and packaging opportunities that were previously not possible. The bottom line for this company is that, by utilizing the cloud, it can generate more profit from the song catalog by providing better, more interesting access to more songs in the catalog.
There are probably dozens more Canadian companies that will directly benefit from increased network capacity, these are three publicly traded companies that come to mind immediately.
With respect to "changing the Internet forever" - there is no "forever" when it comes to the Internet. Grey hairs can remember 1999 when Napster bogged down the Internet as millions of people swapped millions of MP3s. At one point in time, carriers complained that Napster P2P file sharing represented 80% of traffic. Fast forward to 2007 when Bit Torrent P2P media file sharing caused similar capacity issues. The bottom line is that people will find ways to use up data capacity and carriers will always be scrambling for capacity. Wait until consumers begin swapping 3D movie files!
Disclosure: I do not own shares of any stocks mentioned above.
John Chambers hyberbolic messaging around the capabilities of the router focused on the benefits to rich media (in particular video), which has been clogging pipe for years. The scenario painted is massively available rich media streamed from the cloud. Basically, consumers and business everywhere will be able to access rich, high quality media streamed to any device at any time from the cloud with DRM protection on content.
The most obvious immediate beneficiary of this evolving content model is Netflix (NFLX), which would immediately benefit from a streamlined distirbution model for rented movies. Clearly, large media conglomerates that create and manage content would also benefit, as would content originators like sports leagues, musicians, and entertainers. So too would the surrounding ecoystems.
There are several Canadian technology companies that could immediately benefit from the network capacity gains offered by the CR-3 router. These three come to mind:
Intertainment (INT:TSXV) is a micro-cap media company that appears to have caught lightning in bottle with its Itibiti desktop streaming media widget. With NBC as an anchor customer, and with Microsoft choosing it as a reference Silverlight 4.0 deployment, Intertainment is building an influential client fan base for its always on widget. Using the widget, NBC streams content continuously to users while disintermediating the browser. By disintermediating the browser, fans can get entertained in fewer steps, and there is less chance that NBC has to pay Google for the privilege. A big win for NBC, and a big win for Microsoft's media business.
Neulion (NLN:TSX) is a small -cap media company and successor to JumpTV that operates online rich media sports programming for hundreds of NCAA schools, NHL, NFL, and MLS sports leagues. improved capacity for streaming media creates substantial opportunities for live data mashups, playlists, highlights, and rich easy-to-access inventoy of game footage and data. Increased capacity delivers more accessibility and more packaging, which delivers more revenue.
Fluid Music (FMN:TSX) is a small-cap media company that has amassed a low-cost royalty song portfolio. It utilizes multiple distribution and packaging methodologies to generate profits from the millions of songs in the catalog including: background music, packaged lifestyle music and consumer digital downloads via Puretracks. Actually, most of Fluid Music's $90 m in annualized revenue is generated from a small percentage of the total catalog. Although the music industry is on the forefront of streaming media, increased network capacity enables DRM compliant distribution, swapping, and packaging opportunities that were previously not possible. The bottom line for this company is that, by utilizing the cloud, it can generate more profit from the song catalog by providing better, more interesting access to more songs in the catalog.
There are probably dozens more Canadian companies that will directly benefit from increased network capacity, these are three publicly traded companies that come to mind immediately.
With respect to "changing the Internet forever" - there is no "forever" when it comes to the Internet. Grey hairs can remember 1999 when Napster bogged down the Internet as millions of people swapped millions of MP3s. At one point in time, carriers complained that Napster P2P file sharing represented 80% of traffic. Fast forward to 2007 when Bit Torrent P2P media file sharing caused similar capacity issues. The bottom line is that people will find ways to use up data capacity and carriers will always be scrambling for capacity. Wait until consumers begin swapping 3D movie files!
Disclosure: I do not own shares of any stocks mentioned above.
2/16/10
Two-Month Performance: RES Free Thinking Top 10 Tech Picks for '10
After two months, here is the current price performance of the first seven stocks picked for the RES Free Thinking Top 10 for 10. The baseline date is December 16, 2009. The basket of stocks is up 14.5% YTD, and up 3.8% sequentially over the past month. The high flyers continue to be GXI and MMC with PN, and especially CX, under performing to date.
It will be obvious to investors that there are only seven stocks in the Top 10. Three should be added by the end of February.
Disclosure: I owns shares of DSG, BWC, CX, MMC
M Partners Disclosures:
| Price Performance | |||||
| Symbol | Dec-16 | Jan-13 | Feb-16 | Since Dec | Sequential |
| BWC | $ 8.10 | $ 8.70 | $ 9.19 | 13.5% | 5.6% |
| DSG | $ 6.14 | $ 6.70 | $ 6.42 | 4.6% | -4.2% |
| CX | $ 1.17 | $ 1.15 | $ 0.92 | -21% | -20.0% |
| GXI | $ 0.94 | $ 1.15 | $ 1.35 | 44% | 17.4% |
| IEE | $ 0.18 | $ 0.20 | $ 0.20 | 8% | -2.5% |
| MMC | $ 0.17 | $ 0.21 | $ 0.27 | 59% | 28.6% |
| PN | $ 1.76 | $ 1.63 | $ 1.66 | -6% | 1.8% |
| 14.5% | 3.8% | ||||
Disclosure: I owns shares of DSG, BWC, CX, MMC
M Partners Disclosures:
2/11/10
RKN:TSX Q1 2010 Results Down Again - Turning a corner or more turbulence to come?
This morning, Redknee reported Q1 2010 results. Revenue was reported at $11.4m, down 17% from Q1 2009 revenue of $14.2m and up by 13.5% sequentially from $10.4 m reported in Q4 2009. Gross margins were reported at 77%, slightly higher than previous year quarter reported at 76%. Actual gross profit was reported at $9.1m, down from $10.8 m reported for Q1 2009.
2/8/10
Mutliplied Media (MMC.V) Announces Definitive Agreement to Acquire Unomobi.
On Friday, February 5, 2009, Multiplied Media announced that it had signed a definitive agreement to acquire Unomobi for a total value of $6.125 million. As stated in earlier communication, MMC will issue 95,000,000 shares out of treasury at $0.065 per share. The transaction is expected to close on February 11th, 2010, a little ahead of the schedule communicated in late 2009.
2/3/10
Top 10 Posts on RES Free Thinking LTM
There have been 140 articles posted on RES Free Thinking since it was launched. Most posts have an immediate audience and a "best before" date of about five days, after which there is little interest from readers. Considering the time-sensitive nature of most of the content, this should be a typical pattern. However, from time-to-time, a post will capture and hold interest among users for a while, creating a "long tail" of readership. Here is the list:
2/2/10
Mosaid (MSD:TSX): It's Been A Good Month
In the spirit of Chris Bosh being named Eastern Conference Basketball Player of The Week, it seems appropriate to highlight the month enjoyed by Ottawa's technology patent licensing king, Mosaid Technologies.
1/28/10
CEO Series: Interview with Geoff Rotstein, CEO of Cyberplex, Performance Advertising Pioneers.
This is the third in a series of interviews conducted with CEOs of interesting Canadian technology companies. The intent of this project is to provide investors with a unique understanding of what various companies are doing - directly from the top dog. Hopefully, the interviews conducted over the next few weeks will help investors to gain insight into the fundamentals of the companies to which they may not otherwise have access.
After a bit of a hiatus, this interview is conducted with Geoff Rotstein, Chief Executive Officer, Cyberplex (CX.V). The company is headquartered in Toronto, Ontario and is a pioneer in the Cost per Action (CPA) online advertising category.
After a bit of a hiatus, this interview is conducted with Geoff Rotstein, Chief Executive Officer, Cyberplex (CX.V). The company is headquartered in Toronto, Ontario and is a pioneer in the Cost per Action (CPA) online advertising category.
1/27/10
Guestlogix Pre-announces Record Q4 and FY2009: Margins Hint At Niche Dominance
Clearly Management is proud of its accomplishments for 09Q4. Total revenue for the quarter was reported at $5.2 million, up 86% over $2.8 million reported for 08Q4. For FY09, revenue came in at $18.6 million, a 128% improvement over $8.5 million reported for FY08. For the first time, the company reported Net Income for Q4 2009 at $0.2 million. EBITDA was reported at $1.7 million, a $2.7 million total turnaround from a loss of $1.0 million reported a year earlier.
1/25/10
Can Bay Street Get Behind the Moral Abiguity of Avid Life Media?
Andre Compte-Sponville, the French philosopher, argues that capitalism is neither moral nor immoral, but amoral. As an economic system, capitalism is outside any moral concern. Economic objectivists tend to also support capitalism as an objective existential system. Basically, if the numbers are good, the investment should be good.
Over the next few weeks, this theory will be put to the test on Bay Street.
Over the next few weeks, this theory will be put to the test on Bay Street.
1/18/10
One Month Performance: RES Free Thinking Top 10 for 2010
First of all, the RES Free Thinking Top 10 for 2010 is actually Top Seven for now. Three places have been reserved. Here is how the picks are tracking after 1 month.
1/11/10
For those of you not at CES 2010 - Poynt for iPhone
Expect Poynt for iPhone to be available for download by the end of the Month. Notice the "no touch" calling feature.
Multiplied Media is the developer of the Poynt application and is one the RES Free Thinking Top 10 in 10 Tech Picks.
Also last week Multiplied Media announced:
- new local gas station and weather search.
- France, Spain, and Italy deployments.
Disclosure: I own shares of MMC.V, I do not own shares of AAPL.
Multiplied Media is the developer of the Poynt application and is one the RES Free Thinking Top 10 in 10 Tech Picks.
Also last week Multiplied Media announced:
- new local gas station and weather search.
- France, Spain, and Italy deployments.
Disclosure: I own shares of MMC.V, I do not own shares of AAPL.
Route1 "Tipping Point" Eludes Agonizingly *sigh*
Route1 (ROI.V) issued a press release today stating that its exclusive U.S. Government reseller, Qwest Communications, has not met one of the performance criteria of its three year exclusive contract, namely the guaranteed sale of 30,000 mobikey units and subscriptions to the Department of Homeland Security by the end of calendar 2009. This was to be the primary catalyst for the Company for the foreseeable future and a "tipping point" to cash flow and earnings. To date, the US Department of Homeland Security, has installed Route1's DEFIMNET platform in April of 2009 and has taken delivery of 5000 Mobikey devices and associated TruOffice subscriptions.
1/5/10
Fearless Random Predictions For 2010
It is impossible to resist the temptation to share predictions for the coming year despite the potential for embarrassment twelve months from now. So, here they are:
Random Predictions for 2010:
Random Predictions for 2010:
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