GOOG
Danger Zone: AOL (AOL)
AOL is not executing well in its reinvention as a digital media company and can't hope to fulfill the growth expectation implied by its valuation.
David Trainer, Founder & CEO
Danger Zone: Comcast (CMCSA)
The Time Warner deal is a smokescreen for the fact that Comcast faces many problems to which it does not have an answer. The market already understands that CMCSA has overpaid, which is why the stock is down 5% since the acquisition was announced. And the price will drop further as the market catches on to the larger competitive issues that Comcast faces.
David Trainer, Founder & CEO
Danger Zone: Move, Inc (MOVE)
I don’t see any real upside for MOVE. The company is growing revenue, but extraordinary revenue growth is already baked into its price. Competitors like Zillow are already attracting more traffic, and the threat of entry by a larger company looms over the industry. MOVE is overpriced and falling behind in a competitive industry.
David Trainer, Founder & CEO
Apple Stays Rotten
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.
David Trainer, Founder & CEO
Danger Zone 9/16/13: E*Trade Babies
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.
David Trainer, Founder & CEO
Danger Zone 9/9/13: Angie’s List (ANGI)
The customer review website is playing investors, and even its own customers, for fools. I am not sure that consumers will use ANGI’s ratings at all in the not-too-distant future.
David Trainer, Founder & CEO
Excess Cash – Valuation Adjustment
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.
David Trainer, Founder & CEO
Outstanding Employee Stock Options – Valuation Adjustment
Without careful footnotes research, investors would never know the amount of employee stock options that decrease the amount of future cash flow available to shareholders by diluting the value of existing shares.
David Trainer, Founder & CEO
Excess Cash – Invested Capital Adjustment
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.
David Trainer, Founder & CEO
The Truth Behind AAPL’s Numbers
This article provides some empirical evidence behind my putting Apple (AAPL) in the Danger Zone last week because its return on invested capital (ROIC) is outrageously high. That fact underscores why valuing this company or any other with the expectation that such a high ROIC was sustainable would be a mistake.
David Trainer, Founder & CEO
Danger Zone 5/20/2013: Amazon.com (AMZN)
The belief that Internet retail is or will be more profitable than traditional retail is untrue. Amazon is in a competitive, low margin business that cannot justify the profit growth implied in its valuation.
David Trainer, Founder & CEO
Danger Zone 5/13/2013: Apple Inc. (AAPL)
Too many investors are looking at AAPL through the rear view mirror and assume that its sky-high profits and return on invested capital (ROIC) are sustainable. As I detail in my CNBC interview, Apple is not cheap and investors should not underestimate the impact of losing Steve Jobs.
David Trainer, Founder & CEO
How To Avoid the Worst Style ETFs
Picking from the multitude of style ETFs is a daunting task. We are here to make it simpler and smarter.
David Trainer, Founder & CEO
Risk Gets Lighter, Opportunity Gets Bigger for Weight Watchers
One of the best “win-win” combinations in today’s world is Weight Watcher International’s (WTW) stock.
David Trainer, Founder & CEO
Make Money By Losing Weight: Buy WTW
One of the best “win-win” combinations in today’s world is Weight Watcher International’s (WTW) stock.
David Trainer, Founder & CEO
Best and Worst Funds: Information Technology Sector
Information Technology is my top-ranked sector. As detailed here, only it and the Consumer Staples sector get my Attractive rating. Sector ratings, like fund ratings, are based on aggregation of
David Trainer, Founder & CEO
Sector Roadmap For Best and Worst Funds
For those investors interested in rigorous research, I offer my roadmap to the best stocks and funds in the market by sector. The full sector roadmap is here.
David Trainer, Founder & CEO
Picking The Diamonds Out of The ETF Rough
Having too many choices can be intimidating. And there are definitely lots of choices when it comes to ETFs. For example, in the equity market alone, there 30+ technology sector ETFs, or 35 ‘large cap value’ and 20 financial ETFs. A very healthy selection abounds for every category of ETF.
The problem is that these ETFs are not made the same even though they may be in the same category. There are major differences in methodologies between funds, which results in drastically different holdings even within a given sector. See Figure 1.
David Trainer, Founder & CEO