So here I go. Sorry the post is up so late in the day, going forward we’ll try and avoid that. This all started with a post to a small group of friends that started a stock picking challenge of sorts. I’ll be encapsulating a lot of what was said over multiple posts, in this single post. Future posts should show a bit more coherence and eventually settle into some sort of style.
Below I’ll list the stocks I’d picked, and the price that I would have paid for them, when I first picked them approximately 3 weeks ago. I’ll do my best to group these into short term, and long term plays. Long term meaning, simply, that it may take you longer to see a return. Then I’ll close with a few random thoughts, and some comments on what to look for in my next post.
Long Term(5+ Years):
Bank of America – BAC – 42.00
Sirius – SIRI – 6.80
Yahoo – YHOO – 32.96
News Corp. – NWS – 15.59
Disney – DIS – 23.43
Bank of America is making all the right moves. The purchase of Fleet and their expansion in the Northeast should boost deposits nicely. They have excellent customer service, and a stellar marketing campaign. Plus their making the right moves internationally, including taking a big stake (up to 20%) in China’s largest bank, China Construction Bank.
Satellite radio is where it is at, and Sirius is making the deals. They’re getting the exclusive content, the NFL, Howard Stern, Martha Stewart. How important these deals are cannot be expressed, look at what the NFL alone did for Fox in the 90s. Throw in some innovation, the new Sirius S50 Player for instance, video piped to rear passenger facing LCD screens, and GPS + weather and traffic information for real time road conditions. (the last borrowed from XM), and you have a real player. With Sirius growing as fast as it is, I expect it to close the subscriber gap with XM, and eventually over take them to win the Satellite Radio war. Having said that, I don’t think either player will go away, we’ll just have two large profitable players in the long term.
Yahoo is more than just search. Remember Mark Cuban, owner of the Dallas Mavericks? Well it looks like Yahoo was doing more than just handing out large sacks of money when they bought broadcast.com. Turns out something like 37 million hours of media is produced each year, and cable network can only push a small percentage of that to viewers. Yahoo wants to pick up the slack. They’ve got a better shot at this than Google, because they hired insiders, and didn’t offend the people they were dealing with. Two things have come up since I made this pick that make me somewhat less keen on it. The first being Apple and the video iPod. The second being the realization that retailers like Wal-Mart, especially Wal-Mart do not want to give up their content ‘window’. In fact Wal-Mart has gone so far as to say that any movie studio who releases even one title over a system such as what is being talked about by Yahoo, would lose ALL of their shelf space, for ALL of their titles. That being said, I still think Yahoo is a good buy. They’re a proven internet player, and they’re making some other moves to increase revenue and usage. Such as redesigning their website to make it more user-friendly, and much less of an assault on the senses.
I like News Corp because they’re recognizing the necessity to move into the web in a big way, and are doing so, with their acquisition of Myspace and others. Combined with a new focus that moves them away from their old regional systems at fox sports to something more akin to ESPN make them a solid pick at $15 a share.
Disney has a new CEO who’s willing to deal. Just look at what happened with the video iPod and Apple, that’s something Eisner would have never done. Aside from that they’ve really turned ABC around, and even if you ignore that you need to realize that ESPN alone is worth $38 billion dollars. Twice what Disney paid for ABC and ESPN in the 90s.
Short Term(1-5 Years):
International Business Machines – IBM – 82.20
Procter and Gamble – PG – 56.05
Red Hat – RHAT 20.36
Cheniere – LNG – 34.75
Procter and Gamble, and IBM are no-brainers. They’re both down a bit, and they’re well run profitable stable companies, who know how to keep talent on board. PG is learning how to market itself in China, and will see tremedous growth there, and IBM is starting to grow it’s business consulting service. Getting out of the PC business was a good idea too, why fight a losing battle? Just look at what’s happening to Dell if you want some further proof of that.
Linux currently runs on 25% of servers, and that number will continue to grow. Of that 25% Red Hat has a 63% market share. That’s a pretty respectable number. They’re also frugal, going so far as to have their sales reps ride subways when possible instead of taking a cab. I expect to see some good short term growth from them, but they’re going to need to start growing beyond linux at some point to sustain that growth.
There are a number of reasons to buy in Cheniere. You could look at the fact that there is already a strong demand for liquid natural gas, from chemical companies, and realize that it’s market will only grow as oil prices climb. You could see that liquid natural gas is trading at $14/million BTUs, twice what it was a year ago. Finally there’s the fact that Cheniere was forward thinking enough to start building three “regasification” plants, which turn liquid natural gas back into natural gas, that they can use to convert imported liquid natural gas ($1.25/million BTUs in Kuwait, $1.60 in Argentina, $1 in Oman, and $0.70 in Qatar).
One Last pick:
Luecadia Natl CP – LUK – 43.56
I’ve only included this one in here because I picked it initially. I seem to remember them being a holdings company, and I vaguely remember an article about them in business week that inspired this pick. However, I cannot for the life of my find that article, and as such am not willing to comment on or recommend them. Aside from saying that they just sold WiTel to Level 3. Whether this was a good or bad pick, only time will tell, it a bit of a mystery to me now, but I want it here anyway, so that good or bad, I was honest with my picks.
Not to many thoughts at the moment, this post has really covered most of them. Next post I’ll be taking a look at the medical industry. Including the move towards electronic patient records by 2014 being proposed by the NIHN, and trying to see who would be working on those systems. Preliminary shot in the dark at which companies would be working on it: Accenture and EDS. More on that next time.
–EDIT–
The pick I forgot:
Best Buy – BBY – 43.29
Forgot to mention this, but here it is. HDTVs are big money, and with the market saturation currently around 12% there is growth to be had. Wal-Mart and the other large discounters don’t generally jump in till saturation hits around 18%. It’s also worth noting that Best Buy has started to target certain individuals/personality types, such as soccer moms, people who make the technology purchases but aren’t terribly comfortable with technology (not knocking on moms of any kind including soccer, just the description I’ve been given.) They’re hoping that this will drive up sales and revenue. Extra customer attention of any kind, is likely to do that in my opinion.