Archive for the ‘Business’ Category

Stan Lee (a.k.a. Stanley Martin Lieber) passed today.

I tried to think of the right thought.  I have such terrific memories of diving into brand new comic books… but “thanks for the memories” just didn’t seem appropriate.

I was always entertained… but that seem to miss the significance of Stan Lee’s work.

So here’s what I know about Stan Lee and the teams of talented people he worked with over the years:

They knew how to create, no, craft a character.  Even with incredible superpowers, you could somehow identify with them and their situations… your frailties were their frailties… your fears were their fears… your hopes were their hopes.

My earliest hero was Spiderman… but later in life I branched out to just about every character he crafted…

… because I had something to learn from each.

So, ultimately, I want to thank Stan Lee for being a teacher and the greatest storyteller in my life.

Excelsior!

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Apple announced earnings today… they beat on top and bottom lines… and even though iPhone unit sales missed by a tad, average sales price crushed expectations.

Sounds good, right?

Not so fast.  Apple is DOWN almost 6.5% in the after market.

Yikes!

Turns out guidance came in a bit light.

And, Apple said it was going to stop reporting on unit sales, which — supposedly — signals to analysts less volume going forward.

Here’s what I think:

WHAT IS EVERYONE CRAZY?!

Apple just reported 40% earnings growth.  That’s right — 40%.  That’s spectacular for any company… but a company Apple’s size?  That’s p-h-e-n-o-m-e-n-a-l.

To put valuation in perspective:  Usually your P/E matches your earnings growth.  So if you are growing at 10%, you have a 10 P/E.  So if you’ve grown earnings by 40%, you should have a P/E of 40.

But that’s not the case for AAPL.  Apple has a trailing 20 P/E… or, even more amazing, just a forward 14 P/E.  Which means there is a case to be made that AAPL is undervalued… it could be trading 100% higher… or even 200% higher in some circles.

Further, with a company like Apple — that is, consistent… steady… predictable — is light guidance really an issue?  Especially given that Apple usually gives lighter guidance… and has been doing so since the days Steve ran the company?

I think not sharing iPhone unit totals is the real issue… and it’s not with investors… but with analysts that are tasked to create projection models.

Fair enough, it will make their job harder.

But, seriously, Apple is consistent… steady… predictable… AND growing earnings at 40%… and, btw, growing revenues at a whopping 20%, too… their job is already pretty straightforward.

So here’s what I also think:  AAPL may initially go lower… but at some point the investment community is going to say, “It’s the #1 product in the world, produced by the #1 brand in the world.  40% earnings growth means they continue to knock the cover off the ball.  Most of the macro economic indicators are still intact.  Uhm, are we daft?!”

That’s when the momentum will shift… and we’ll see AAPL move higher.

And, despite what will seem like a stock-crushing open, I think it could happen sometime tomorrow.

UPDATE:  Well, uhm, maybe next week.  :)

There’s a lot of noise in the market.

But there’s usually a lot of noise.

By definition — at any point in time — 50% of people think there’s enough bad in the market to sell their shares to the other 50% who thinks there’s good.

Can’t have a market otherwise.  That’s why I always scoff when someone refers to “easy” trading periods.  It’s never easy.

What helps guide you through the noise is whether your fundamental investment thesis is still intact.

Is mine?  I think the two biggest drivers of corporate profits — which drive the market — are the price of oil and interest rates.  Let’s see where they stand:

* While oil took a little run to the upside, I wouldn’t call it misbehaving.  In fact, it’s shed much of its 2018 gain

* Interest rates are spooking everyone… but 10-year is sneaking back down… and Trump’s on fire about the Fed messing things up — so much so that a few Fed governors have had to reiterate that they won’t, uhm, mess things up (i.e., “will still be accommodative for quite a while”)

* Sentiment is negative.  While that’s not comfortable, as a contrarian I prefer this

So, for me, at least right now, the noise is… just noise… and what we’re seeing is some healthy “letting some air out of the balloon”… which we like… so it doesn’t pop.

 

P.S.  A great example of “noise” was Caterpillar earnings.  They beat top & bottom line.  But everyone was fretting about China and tariffs… and the stock got pounded… even though if you read their commentary, you find CAT itself wasn’t so worried about the effect of China or tariffs on its business.  Here’s some commentary from their 10/23/18 earnings call:

* CATERPILLAR SAYS FEEL GOOD ABOUT EQUIPMENT DEMAND IN CHINA NEXT YEAR

* CATERPILLAR SAYS EXPECT BUSINESS TO CONTINUE TO IMPROVE IN 2019 VERSUS 2018

* CATERPILLAR SAYS CONTINUE TO EXPECT INDUSTRY SALES IN CHINA FOR 10-TON-AND-ABOVE EXCAVATORS TO BE UP ABOUT 40 PERCENT FOR THE FULL YEAR

* CATERPILLAR SAYS EXPECT IMPACT OF 25 PERCENT IMPORT TARIFF ON ADDITIONAL $200 BILLION CHINESE GOODS TO BE ‘QUITE MINOR’

These are all good things, right?!

I have to hurry this post because Microsoft is about to announce earnings.

For the first time in many years, Microsoft’s earnings are incredibly relevant again.

As many know, MSFT is in the process of successfully reinventing itself… to be a big-time cloud competitor.

Their earnings after the market closes today are important because the market is in desperate need of some kind of clear signal… either that things are still ok in tech land… or they’re not.

It just so happens MSFT is announcing before Apple, Amazon, Google, and Facebook… which means all eyes will be on their report.

Now, Microsoft has a reasonable stage set.  Adobe reaffirmed guidance last week… which I believe single-handled stopped the market from another 5-10% slide… since everyone was/is feeling like we’ve driven off a cliff… given tariffs… and global tensions… and interest rate hikes… and Trump acting decidedly unpresidential most of the time.

And Netflix killed their earnings, too, which even though it doesn’t seem like it, also helped provide some footing in this decidedly negative market.

But some disturbing things are still happening.  iRobot (IRBT), makers of my favorite electronic device in the world (Roomba!), killed their numbers, too… and the stock was still hammered today… simply because they cited some potential tariff impact… even though they still raised guidance.

What the market wants — craves — now is more assurance… that the consumer is still spending… that interest rates, while increasing, will increase in a slow and measured pace… that oil isn’t going to spike… that tariffs are having a positive effect somewhere in the food chain…

… essentially that the foundation for investment is still sound.

A good report from the once most dominate and influential tech company in the world… that has clawed its way back into relevance… could turn everything on a dime.  Stay tuned!

UPDATE:  Earnings were solid.  Beat on both top and bottom lines.  Stock was up almost 5% at one point in the after-hours market.  (BTW, Tesla TSLA also reported and nailed it… it’s up over 10% in after hours… and ironically they mentioned tariffs and it doesn’t seem to be impacting the pop.)

I was OVERJOYED by this headline:

Trump says each Cabinet secretary should slash 5% of their budgets after he pledges to cut spending

Remarkably, even one of the slipperiest* figures in politics, Kellyanne Conway, said something COMPLETELY INTELLIGENT:

“He’s asking them to cut the fraud, the waste, the abuse,” White House senior advisor Kellyanne Conway said on Fox Business Network. “Cut the fat, not the essentials.”

I think Trump should have asked for 10% — in business that’s considering an easy and smart cut as it forces you to really examine all of your projects and cut the worst performing one — but 5% is fine to get this party started.

 

*  Sorry for tongue-tying word but that describes her perfectly.

We had to be clean shaven in high school.  So when I went off to college, one of the first things I did was grow a mustache.

Longer (as was the style) in the 70’s and 80’s… and shorter for the last few decades… it’s been with me ever since.

Until today.

After 40 years, I’m not sure why I picked October 17, 2018 to shave it off.  Maybe it’s because I was meeting with a bunch of entrepreneurs at Draper University today… and was admiring how all these kids were stepping way outside their comfort zone to take on something new and risky.

And then I thought, I should do something new and risky, too.

For me, that’s not starting a business or investing or such, I do that quite often.

Nah, for me, it had to be something I haven’t done before… or at least something I haven’t done in a looong time… which I believe 40 years qualifies as.

And, so, out came the razor… !

Happy Face with Moustache

 

P.S.  As you can see, the haircut is the same.  ;)

This shouldn’t be news.  On CNBC, no less.  It’s an embarrassment.  Grow up and be presidential, Donnie.

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