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What We’re Reading This Morning — September 10, 2014

Wednesday, September 10th, 2014 512px-Ackerman_farmer

What is Microsoft trying to buy for $2 billion?

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What We’re Reading This Morning — September 9, 2014

Tuesday, September 9th, 2014 512px-Ackerman_farmer

Will this stock market ever go down?

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What We’re Reading This Morning — September 8, 2014

Monday, September 8th, 2014 512px-Ackerman_farmer

Why has Apple’s iPhone thus far been a flop in China?

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What We’re Reading This Morning — September 3, 2014

Wednesday, September 3rd, 2014 512px-Ackerman_farmer

Have profit margins finally leveled off?

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What We’re Reading This Morning — August 26, 2014

Tuesday, August 26th, 2014 512px-Ackerman_farmer

How much do recessions and expansions really matter for equity investors?

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What We’re Reading This Morning — August 13, 2014

Wednesday, August 13th, 2014 512px-Ackerman_farmer

What trend should scare Apple shareholders? And other morning reads.

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Do Microsoft Bulls Have A Convincing Case?

Tuesday, August 5th, 2014 14450220780_28247b8642_m

MSFT currently earns our Neutral rating, but if new CEO Satya Nadella can halt the company’s declining return on invested capital (ROIC), the stock’s valuation is cheap enough to make it intriguing.

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What We’re Reading This Morning — August 5, 2014

Tuesday, August 5th, 2014 512px-Ackerman_farmer

What is Warren Buffet doing with all of his cash? And other picks from around the web.

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Amazon’s New Smartphone Spells Trouble for Apple (AAPL)

Friday, June 6th, 2014 AMZN_kindle

A high quality smartphone from Amazon that undercuts higher-priced competitors could mean more serious trouble for Apple’s iPhone and the company’s declining profit margins.

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Netflix (NFLX): Even More Dangerous

Wednesday, April 2nd, 2014 6126059318_fa4f25535d_b

In November of last year, Netflix (NFLX: ~$355/share) landed in the Danger Zone after rising 363% year-to-date on promising quarterly… Read more >>

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Apple’s Declining Advantage is Undeniable

Wednesday, January 22nd, 2014 10051113933_27211bffeb

Apple cannot have pricing power and market share at the same time. No one can for an extended period of time. The problem with AAPL is that it is priced for the company to achieve market share penetration and growth at high prices. The reality is that the quality of Apple products versus competitors is declining. Prices will have to come down just to maintain market share.

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CNBC Interview: Confirming AAPL Thesis – Apple Is Still Rotten

Tuesday, September 24th, 2013 CNBC Interview: Confirming AAPL Thesis – Apple Is Still Rotten

Here’s my latest CNBC interview on my Apple (AAPL) thesis, originally articulated in Danger Zone 5/13/2013: Apple Inc. (AAPL).

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Apple Stays Rotten

Thursday, September 19th, 2013 AAPL_ROIC

The “value” in Apple is an illusion. Astute investors need to look at Apple through the lens of what is a reasonable ROIC in the future.

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Danger Zone 9/16/13: E*Trade Babies

Monday, September 16th, 2013 DZ_Fig1

Online trading firms aim to exploit the gullibility of many retail investors by encouraging the myth that they can outperform professional money managers armed with vastly greater resources, experience and expertise. The E*Trade babies are the most glaring symbol of this myth. The symbol also reinforces the notion that investing is an easy task that takes no special effort or aptitude to succeed.

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Excess Cash – Valuation Adjustment

Friday, August 23rd, 2013 ExcessCash_Figure1

For most companies, we estimate the required amount of cash for normal business operations to be around 5% of sales. However, many companies hold cash or other liquid investments above and beyond this amount. We refer to this extra amount as excess cash. This surplus cash can be used for any number of purposes, including acquisitions, research and development, and cushioning the company against economic downturns. Excess cash is immediately available for distribution to shareholders, so we add a company’s excess cash to our calculation of shareholder value.

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Excess Cash – Invested Capital Adjustment

Wednesday, August 7th, 2013 ExcessCashTable

Most companies hold some cash—or cash equivalents in the form of investments—above this required amount. Companies hold excess cash in order to cushion against economic downturns, prepare for acquisitions, or any number of other reasons. Sometimes, past profits pile up on balance sheets and are a form of excess cash. Excess cash is not needed for the operations of a company. It is removed from our calculation of invested capital.

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Danger Zone 6/17/13: Citigroup (C)

Monday, June 17th, 2013 DZCG1

As the market bulls continue to look to rising interest rates as a sign of future strength for Citi, they ignore the fundamentals of the market and of Citi’s weak profit history.

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Danger Zone 6/10/13: “Passive” Investors

Tuesday, June 11th, 2013 Danger Zone 6/10/13: “Passive” Investors

Passive investors are in the Danger Zone for not recognizing that they are actually active investors.

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Danger Zone 6/3/2013: Perma-Bears and Bubble Alarmists

Monday, June 3rd, 2013 Danger Zone 6/3/2013: Perma-Bears and Bubble Alarmists

I am optimistic about the U.S. economy and I don’t believe we are in bubble. Too many investors and economists are looking at the economy the wrong way.

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“Index” Label Myths

Friday, May 31st, 2013 “Index” Label Myths

The word “index” in an ETF label does not always mean that investors are getting the specific exposure they seek. Diligence on ETF holdings is necessary despite what the providers might have you believe. Below I dispel the following myths concerning index ETFs.

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