117 Sell Delta?
Buffett said: If you want to be a millionaire, first be a billionaire and then buy an airline. However, 2012 could be the best year for most well-managed airline stocks. It is due to the extra charges such as charges for extra luggage, acceptable fuel cost and less competition due to the many mergers.
Delta looks like a bargain if you look at its low expected P/E and the outlook on the economy and the falling oil price. The fundamental metrics besides the P/E as of 3/2013 are not so good. There are too many major problems as follows.
1.
High debt, a common
and traditional problem in this industry.
2.
High pension
obligation, same cause to bring down the old GM.
3.
High wages raised by
unions.
Bankruptcy would reduce the above three
problems. Buy it after the bankruptcy if there is one.
4. Unable to raise the prices of the air ticket; they have not kept
up with inflation over the years. They have to make money with less profit per
passenger but with far more passengers than before. However, fewer airlines
mean less competition.
5. Deregulation has its problems. The government should regulate
some industries and airline is one of them. The government should do a better
job on what and how much to regulate this industry.
6. Besides competition from other airlines, high speed trains,
trains, buses and cars offer a lot of competition especially for short-distance
trips. They also face competition from
new, smaller with leaner operation, direct flights and newer planes with better
fuel mileage, not to mention the incentives to the foreign airlines from their
governments.
7. Merger will have fewer airlines and reduce competition. However,
when two losers merge together, they become a bigger loser. The Virgin Air
could provide long-term synergy, but it is too high a price to the acquirer.
8. The stupid hub concept is getting more stupid with rising fuel
prices and the inconveniences to their customers.
The future will be less
stop overs with larger and newer jets that are more fuel efficient.
9.
High cost of
terrorism.
Most foreign airlines are subsidized by the government. Our government has bailed out other industries but not the airline so far. The only bright point is the airlines profit by jacking up the ticket prices, but you can’t do it excessively in this poor economy.
Most foreign airlines are subsidized by the government. Our government has bailed out other industries but not the airline so far. The only bright point is the airlines profit by jacking up the ticket prices, but you can’t do it excessively in this poor economy.
10.
Future shortage of
pilots.
Many retire and many find new jobs in Asia. It is not an exciting profession as in the previous generation.
Many retire and many find new jobs in Asia. It is not an exciting profession as in the previous generation.
Afterthoughts
118 Bank of America
Some dividend investors still praised how great BAC (Bank of
America) is. This stock did come back great for the year of 2012. BAC could make another big price surge in the
second half of 2013. When you have fewer banks, you have better market share
and better opportunities to make money. In addition, the toxic loans should be
reduced by now.
For the last five years starting from 2007, BAC has been falling from about $50 to about $8. The total dividends added will not offset the big loss. In Dec. 2007, BAC paid about 5% dividend at a price around $45. It would be loved by dividend investors back then, but not anymore after they found out how much their stock had depreciated immensely.
Their argument is the total dividends from the IPO day and even today’s depressed stock price could have doubled their initial investment. This argument has too many flaws including the following:
For the last five years starting from 2007, BAC has been falling from about $50 to about $8. The total dividends added will not offset the big loss. In Dec. 2007, BAC paid about 5% dividend at a price around $45. It would be loved by dividend investors back then, but not anymore after they found out how much their stock had depreciated immensely.
Their argument is the total dividends from the IPO day and even today’s depressed stock price could have doubled their initial investment. This argument has too many flaws including the following:
1. The
performance should be adjusted to inflation.
2. If
I bought Apple at its IPO, I could be thousands times richer than owning BAC.
You just cannot draw a conclusion on a strategy from a specific stock and using
a period favorable to your argument.
When
we evaluate a stock, we should skip
some sectors or not using our conventional way to score a stock such as the
banking sector. The quality of the mortgage requires more expertise than using
the common fundamental metrics.
In
addition, we should avoid our biases such as loving blindly a strategy
(dividend strategy in this case). Most strategies will fall eventually when the
strategy is over-used. Do you remember buying internet stocks before 2000?
119 Caterpillar
You may need to hold CAT longer like two years (after 2014)
when the economy would start to recover. Even with the present metrics, it
looks great. As of 5/12, the mining (Chapter 34) and construction businesses
are slowing down but they will come back eventually.
On 5/7/12, it scored at 24 from my scoring system which indicates a buy for any score over 15. However, the short-term outlook of the market does not look good.
Value Line indicates annualized 16% return after 3 years (8% is good for me). Fidelity has 9.5 out of 10 from a summary of analysts. 17% of its stock price is cash. It is 98% cheaper compared to its 5-year average P/E. In a word, it is deeply-valued.
The only negative point besides the global economy is its high debt / market capital though it is quite normal in its industry. It wrote off a Chinese company it acquired due to fraudulent financial data. The management has to bear some of the blame. Well, if a big company with its immense resources cannot detect the fraud, how can we, the retail investors, detect such frauds?
On that day of the analysis, the stock price was 97.19 and today it is 79.14. I bought it two times in between these prices. Is it a gem or will it fall further? Only time will tell.
On 5/7/12, it scored at 24 from my scoring system which indicates a buy for any score over 15. However, the short-term outlook of the market does not look good.
Value Line indicates annualized 16% return after 3 years (8% is good for me). Fidelity has 9.5 out of 10 from a summary of analysts. 17% of its stock price is cash. It is 98% cheaper compared to its 5-year average P/E. In a word, it is deeply-valued.
The only negative point besides the global economy is its high debt / market capital though it is quite normal in its industry. It wrote off a Chinese company it acquired due to fraudulent financial data. The management has to bear some of the blame. Well, if a big company with its immense resources cannot detect the fraud, how can we, the retail investors, detect such frauds?
On that day of the analysis, the stock price was 97.19 and today it is 79.14. I bought it two times in between these prices. Is it a gem or will it fall further? Only time will tell.
Afterthoughts
·
As of 9/2012, CAT has appreciated by 10% from
7/2012. Together with Cisco, they’re supposed to be ‘Buy (bargains) and Forget
(until the economy returns)’ stocks. The good news on China’s stimulus plan
makes the stock rise. I will forget this stock until 3 years later. In the mean
time, the immediate prospect is not good for CAT with the decreasing of most global
infrastructure projects and mining projects.
·
Buy CAT for the dividend according to this SA article.
120 Microsoft’s tablet
The
Good
Microsoft should capture a sizable market for business users if they market the product Surface right. They provide Word Office, a browser compatible with Internet Explorer (IE) and storage via Cloud. Built-in disk storage may not require Cloud for storage, but it would drain the battery and take long time to boot if it is from disk (the new version of Windows greatly reduces the boot time).
Most of my investment software requires IE
and all of my investment spreadsheets use Office’s Excel. It will be a good
tablet for business folks especially for travelling.
I do not believe I'll use it during my vacation but it will be a handy tool to many. We will see how Office is implemented in the tablet, the energy consumption using the Intel chips and the prices. It will be appealing if you can run the business software in your tablet and your office PC.
Migrating current business applications to the tablet is a good such as the laptop applications my doctors are using.
As long as it is not losing money, it would be a win especially for the lazy Microsoft’s management with no innovation for a long while. You cannot sit on the cash influx from Windows and Office forever. Wake up from your afternoon sleep and dream on how to spend your bonuses in your fancy offices and do something even it will not always be safe.
I do not believe I'll use it during my vacation but it will be a handy tool to many. We will see how Office is implemented in the tablet, the energy consumption using the Intel chips and the prices. It will be appealing if you can run the business software in your tablet and your office PC.
Migrating current business applications to the tablet is a good such as the laptop applications my doctors are using.
As long as it is not losing money, it would be a win especially for the lazy Microsoft’s management with no innovation for a long while. You cannot sit on the cash influx from Windows and Office forever. Wake up from your afternoon sleep and dream on how to spend your bonuses in your fancy offices and do something even it will not always be safe.
The Bad
Surface will not be replaced as a consumer product as iPads are years away with growing apps. The new version of Windows has a lot of nice features. It is very buggy as of 3-2013. I hope they have a specific version for tablet.
My thoughts
When Surface was announced, it was a non-event. The first article on Surface at Seeking Alpha, a website for investors, appeared very late. There was not much publicity as opposed to folks lining up for Apple's products. As a stock owner, I hope it will change.
Microsoft should
not compete with iPad directly with the RT. The Pro is ideal for business folks
with Office and Internet Explorer installed with full functions. I predict the
Surface Pro will be the winner and RT will fade. Personally I plug in my
electric outlet automatically on my laptop so I will not be disturbed while
working. The battery life will not be a concern to me and I expect the newer
chips from Intel will resolve this problem.
Afterthoughts
More on Microsoft.
http://ebmyth.blogspot.com/2013/11/more-on-microsot.html
121 Apple
At the current P/E (as of 1/2013), it is cheap especially if
you consider their cash reserve. However, Apple will not have the same growth
rate beyond 2015. As of 2012, it turned itself from a growth stock to a value
stock with minor dividend. After one or two upgrades, its iPhones and iPads will
not be economically feasible for upgrades except to boost one's social status.
I expected many will take profit in the 4Q 2012 expecting higher capital gain
tax next year. [Update: This has not been materialized.] My bet is it will come
back to 600 if we have good sales of iPhone5 in China. The lure warm reception
in China may not solely due to the products and the market. It is due to
Apple’s allotment system, the supply and the network partners.
Apple has lost a visionary leader
Steve Jobs. I hope he was not replaced by similar managers at Microsoft, who
are responsible for Microsoft's lost decade without innovations. Apple has a
lot of cash to finance new projects. High tech business is tough as you need to
build a better mouse trap continuously. When the mouse trap becomes a
commodity, it will not have a good margin profit. That’s one reason that
Buffett does not invest in Apple.
It will fluctuate between 400 and
700 for a while. The stock price will benefit by splitting the stock by 1 to 10
and increasing its dividends.
There are bright spots for Apple:
1. Apple
Text Book. Imagine all students carry iPads instead of text books.
2. Apple
TV.
It is a loser so far with a lot of risk. However, the potential is great.
It could give all cable companies a run for the money. We need a faster and
wider channel from the internet to make it economically feasible. Will the
cable companies provide these speeds to allow Apple to step into their turfs?
3. While
the iPad and iPhone are peaking in the hardware, iTune, software and contents
for these devices to access have no limit. We have witnessed how iPad helps the
folks with autism. I can envision many similar applications.
4. Apple
moves to Kindle's market. iPad is too big to be used to read books during
commute. You need to hold an iPad with two hands. Kindle is still the king for
commuters. However, the mini iPad, even making
fewer profit margins, will be Apple’s answer to Kindle and a good addition to
cover the lower end of its product lines.
The high tech companies are always building better mouse
traps than its competitors. It has to plow back a lot of their profits into
research and development. When the
company does not do so and /or does not acquire companies that have the
technology edges, watch out.
Apple has great products ahead of its competitors (Samsung
could be an exception). To illustrate, some companies can compete with Apple’s
iPhone line with lower cost products.
As of 1/2014
China will open up 4G LTE for
iPhone line in more cities and Apple will benefit. The wrong argument is that
Chinese lower wages will not allow too many sales. China’s middle class that
can afford these products may be the same size of the USA’s total
population. Many Chinese buy prominent
products to boost their social standing.
Apple should acquire Sony for the
contents for many of its products. It is a no brainer to me if the two
governments allow so. The market cap of Sony is a drop in the bucket for
Apple’s huge cash reserve and free cash flow. It is a case that dividends
should take a back seat for acquiring companies for the long-term benefit of a
company.
Afterthoughts
There are so many afterthoughts and each
could be a brief article by itself. Most are my comments in forums.
Will Apple bring more jobs back home from
China?
Despite the recent announcement of bringing assembly of some
PCs back, the U.S. will not gain a lot of jobs for too many reasons:
·
There is a huge difference in wages. We cannot
live with a $2 per hour wage in the USA.
·
Our unions will never allow those excessive
overtime practices (1.5 x 41-60 hours, 2x over 60 hours), monotonous jobs and
crowded dormitory conditions, which are substantially better for other migrant
workers in China.
·
Apple's products depend on rare earth elements
that are only available in that scale and prices from China.
·
Our taxes are getting higher due to the generous
entitlements and welfare, expenditures on the two Middle East wars, and
eventually the high cost to service our public debts that are getting higher
and higher. When corporate taxes are high, the corporation’s profit will be
squeezed. It is similar to personal taxes.
Compared to
some other developed countries, the U.S. taxes are not too high. However, the CEOs
today have a choice to choose their locations of headquarters and/or factories,
they will select the most favorable ones and the U.S. is becoming less
favorable.
·
There are about 40,000 technicians and engineers
(even their qualifications have been challenged) to support these manufacturing
jobs at low wages. Where can we find so many qualified folks (even for 20,000)
in the U.S.? For example, we have 120,000 computer-related jobs this year and
we only have 40,000 graduates with computer degrees in all colleges in the U.S.
·
China's internal market for Apple's products
will be potentially larger than the U.S. market. Chinese do not mind to pay for
double the U.S.'s prices to boost their social status or spend money to help to
educate their children.
iGeneartion
I've a good laugh while reading an old joke on life in 2009 (http://www.tonyp4joke.blogspot.com/2009/03/living-in-2009.html).
We have big changes in the last three years. This is the iGeneration with every one carrying an iPhone or an iPad (folks in the lower society class carry imitators and/or those 'outdated' iPhones and iPads that are several months old). J
My grandchild of just over one year old has a good time in playing with the iPad and it would keep her busy for hours. Before she could say Mommy, she said I for iPad.
When my cousins gather for social/family events, they communicate with each other via their smart phones even if they sit next to each other. When they do not text messages, they play games with their smart phones.
Even with one pair of eyes and one pair of ears, they can play iPad, listen to iPod, text using iPhone and watch iTV at the same time. Incredible and that's why China and India are leaving us further and further behind. Thanks Apple for demonstrating what multi tasking is. I prefer to do one task correctly than five tasks incorrectly.
Kids will develop big fingers particularly the second one and the thumb, fast eyes with thick glasses, and bent backs. They will be fatter, smarter as a child but dumb in later life, and lack social skills. It is a double-edged sword.
We have big changes in the last three years. This is the iGeneration with every one carrying an iPhone or an iPad (folks in the lower society class carry imitators and/or those 'outdated' iPhones and iPads that are several months old). J
My grandchild of just over one year old has a good time in playing with the iPad and it would keep her busy for hours. Before she could say Mommy, she said I for iPad.
When my cousins gather for social/family events, they communicate with each other via their smart phones even if they sit next to each other. When they do not text messages, they play games with their smart phones.
Even with one pair of eyes and one pair of ears, they can play iPad, listen to iPod, text using iPhone and watch iTV at the same time. Incredible and that's why China and India are leaving us further and further behind. Thanks Apple for demonstrating what multi tasking is. I prefer to do one task correctly than five tasks incorrectly.
Kids will develop big fingers particularly the second one and the thumb, fast eyes with thick glasses, and bent backs. They will be fatter, smarter as a child but dumb in later life, and lack social skills. It is a double-edged sword.
We
have to see whether it is a blessing or another addictive habit in disguise. We
may have developed the modern-day Trojan Horse – give them to Iran and N. Korea
free.
Can't wait for the next three years!
Can't wait for the next three years!
P.S. Some parents of our generation have a hard time to
explain to their children that their existence was due to the blackout of the
iPad and iPhone caused by the recent hurricanes. On the bright side, it is Apple’s way to
control global population.
Jokes.
·
Chinese burned paper
cars to their dead. The shopkeeper told his customer who bought a paper iPhone
not to forget to buy a paper charger. It would be worse if your ancestor asked
him to bring it down to his ancestor. This joke may not work for different
culture.
More on Apple.
http://ebmyth.blogspot.com/2013/11/more-on-apple.html
122 Nokia, iPhone, iPad
Nokia runs on Windows now. The risk is
high to deal with new software and new hardware. Nokia could be just a big
bargain or a bouncing dead cat. It is very risky but it could be very
rewarding. Do not bet your farm on it. As of 12/2012, they had a phone with
picture quality better than most point-and-shoot cameras.
The tablet for Windows is in a similar situation. When you're late for dinner, the food at least the better ones have been eaten. Apple has the advantage of being a better mouse trap. They are supported by the huge number of quality apps. Samsung is Apple’s sole competitor now. The lower end market is dominated by Chinese and Taiwanese companies.
I predict the tablets running on Window will be popular for business users and investors like me which could be a huge but ignored market.
The tablet for Windows is in a similar situation. When you're late for dinner, the food at least the better ones have been eaten. Apple has the advantage of being a better mouse trap. They are supported by the huge number of quality apps. Samsung is Apple’s sole competitor now. The lower end market is dominated by Chinese and Taiwanese companies.
I predict the tablets running on Window will be popular for business users and investors like me which could be a huge but ignored market.
The vision of
Steve Jobs changed our industry and Apple became the most valuable company as
of 2012 when its stock was 700 (a little high for me to buy). He was not the
real pioneer in my definition, but his passion made great products and drove
his engineers to the limit. Steve Jobs separated Apple from the rest. He was
smart to outsource his manufacturing to China with low wages, better educated
work force, easier access to the rare earth elements, etc. In the U.S., the
unions and regulations would not allow Apple to produce quality products in
amazing speed. Moving assembling PCs back to the U.S. will improve the image,
but this will hurt the bottom line.
Nokia
already had iPhone and iPad in the drawing board seven years ago. Microsoft had
one too a long while ago and it failed miserably. Windows and Apple’s screen
interface were copied from Xerox’s PARC. When you do not convert your research
to practical products, others will use and enhance your ideas and build products
based on your original ideas.
I wonder
what happened to all those managers at Xerox. Did they receive generous bonuses
for not bringing their ideas to market? The engineers and scientists who
invented all these ideas must be frustrated. May be high tech companies should
be run by programmers, engineers and scientists such as Jobs and Gates, not by
some MBAs who know nothing about high tech except counting numbers.
Windows
8
I like the new Windows especially in the
reduced time to bring up the system.
However, there are bugs/problems that should be fixed before its initial release. The companies including Microsoft and Google rush their products too early to market to make an extra buck. It will hurt their customers and the company itself in the long run. The days we had focus group, Alpha testers and Beta testers have gone.
However, there are bugs/problems that should be fixed before its initial release. The companies including Microsoft and Google rush their products too early to market to make an extra buck. It will hurt their customers and the company itself in the long run. The days we had focus group, Alpha testers and Beta testers have gone.
I wrote a paper
on the importance of paper testing to aim at achieving zero bugs: Try to list
out all the possibilities of the program flow (or user interactions) and test
the flow (or user interaction) one by one by using a pen – I called it paper
testing or simulation using a wind tunnel. If you find 10 bugs, it means you
have not tested the program thoroughly. Repeat
the testing until there is no bug.
The current
version of Windows has more holes than Swiss cheese.
However, Windows is heading to a new world and I believe it will be successful or most of us have no better choice than cry. My HP 17" laptop is only $400 after all the rebate and discount.
Jokes
The first two jokes are from Amazing Photos and the rest are circulated to me with unknown authors and/or modified by me.
The first two jokes are from Amazing Photos and the rest are circulated to me with unknown authors and/or modified by me.
·
Steve Jobs enjoys heaven as there are no
Windows and no Gates.
·
The waiter was angry
with his $2 tips from Gates and he shouted at Gates that his son gave him $200
tips. Gates told him that guy's father was a lucky billionaire and his was a
hard-working farmer.
123 Cisco and Huawei
(http://en.wikipedia.org/wiki/Huawei)
Do they pass information to the Chinese government on sensitive data from their routers? They're all unfounded accusations to fight competition.
Do they pass information to the Chinese government on sensitive data from their routers? They're all unfounded accusations to fight competition.
If the
secrets can be stolen that easily, we have to blame Cisco for not protecting
their secrets and we would have many companies like Huawei. Cisco is using this
to protect its bidding from Huawei unfairly. This tactic works successfully in the
U.S., but not outside the U.S. It is a case of its sales force in the U.S. does
not care about the sales force in China.
The fact is there is no trap door to steal data from the network. If there is one, a good percentage (about 20%) of the global traffic has been routed via the Chinese equipment already.
It is a fact
that companies spy against each other (same as countries), no matter it is a
Chinese company or an American company. If you believe CIA (same for NSA)
is just gathering information, you believe in fairy tales or your dumb
nationalism covers your eyes. It would backslash on Cisco when China stops
Cisco from selling its products to China for the same reason.
Cisco does not have the technology in G4
LTE as the top three companies (ALU, Ericsson and Huawei) do. The stealer has
better products than the stealee! Cisco has missed the opportunity to buy ALU
when ALU was $1 per share. I hope they’re working on this important technology.
Cisco and its rival Huawei are riding on the economy. Many devices will be connected to the web. Cisco, Huawei and companies in this sector will all benefit. Singapore today provides a glimpse to the future. Every street has surveillance cameras which are connected to the internet via routers.
Cisco and its rival Huawei are riding on the economy. Many devices will be connected to the web. Cisco, Huawei and companies in this sector will all benefit. Singapore today provides a glimpse to the future. Every street has surveillance cameras which are connected to the internet via routers.
I expect
Cisco's stock price will fluctuate with today's range (as of 5-2013) and it
will take off after two or three years hopefully when the global economy
recovers. Huawei will be in better position in the long term as their research
and manufacturing costs are far lower than the U.S. and it doubles the size of
Cisco. Huawei's products are very competitive and already have captured good
market share outside the U.S. The margin of the industry will still be
favorable.
Afterthoughts
More on Cisco.
http://ebmyth.blogspot.com/2013/11/more-on-cisco.html
124 ALU
ALU fell from $6.50 to $1.00 in Nov.
2012 and rises to over $3 in 2013. I read two similar articles on ALU and Cisco
from Wall Street Journal. I predict it will lose more than half of its peak in
2013 by the end of 2014.
The
bad
- The company is not recovering esp. with the global recession that I expect to continue with Obama's policy and the EU crisis.
- It could bankrupt if they cannot service their long-term debts (about 2 B) that are larger than their entire market cap.
- It should not be the management as the stupidest fools cannot make it that worst. However, they have to lay off more than the announced to save some cash.
- The problem is China, namely Huawei. Chinese engineers and researchers in Huawei have a fraction of this compensation.
China is a major market for Huawei. When it becomes a public company, it would add wings to its already strong body; a public corporation will attract professionals and leaders. China's huge market will be a good customer base for Huawei.
It reminded me of one apparel stock I owned. It could not compete with low-wage country even before lifting the embargo to China. When the management did not do anything positive, it will die even the chance for ALU is slim.
The good
- Cisco may buy it with a combination of
stock and cash and it is better than giving dividends (that has raised the
stock price and great for its investors).
Cisco does not have the state-of-the-art technologies that ALU, Huawei and Ericson have. It will be a strategic buy but 2B plus the hefty debt is not too easy to swallow. However, they can sell many of AUL’s other products / patents that do not have synergy with Cisco.
Cisco does not have the state-of-the-art technologies that ALU, Huawei and Ericson have. It will be a strategic buy but 2B plus the hefty debt is not too easy to swallow. However, they can sell many of AUL’s other products / patents that do not have synergy with Cisco.
- When ALU is broken down into pieces,
it is worth at least four times its market cap (two times when you include the
debts). It has more patents than most companies in the world.
- EU intervention with US's help.
EU is a mess now and I do not think they can bail ALU out. EU and the USA will encourage local companies and government to buy ALU's products and stop Huawei.
Cisco is successful in doing so arguing with security reason. It is not a valid reason as some of the internet traffic has been routed to Huawei's products already and they will expect China to strike back for the same reason.
- EU intervention with US's help.
EU is a mess now and I do not think they can bail ALU out. EU and the USA will encourage local companies and government to buy ALU's products and stop Huawei.
Cisco is successful in doing so arguing with security reason. It is not a valid reason as some of the internet traffic has been routed to Huawei's products already and they will expect China to strike back for the same reason.
- Need a partner and an
investor.
As of 11/2013, I do not want to invest in French companies
for the following reasons:
·
EU is still a mess. They depend on selling goods
between the EU countries.
·
You will incur some fees: A one-time
fee of about $27 plus a 0,20% transaction tax. My estimate.
·
They have 12 weeks of vacation. Can they compete
in the global market without selling to EU?
·
Their unions are too strong.
125 Is Volt a devil or an angel?
Financially Volt is a disaster but it serves as a compliance
car. It drove GM to the brink of bankruptcy – thanks to Chinese for saving GM.
Without Volt, the investors of the new GM could make more money. The current owners
of Volt do not have good resale values.
Estimate how many miles you drive in a year to calculate how much money you save in gasoline. Most likely it will not pay back the extra investment / maintenance (two drive trains until we have a pure electric car) / reliability, the extra electricity bills, the inconvenience of charging (your time as a Volt owner must be more expensive than the time of a Corolla driver), finding a qualified mechanic (except from the dealer who will charge you a bundle), the tickets for driving too slowly, the increased chance of hitting something due to no warning sound...
Why folks buy it besides the rebates from the government (at least at one time)? It is the same folks camping in line to buy the new iPhone to replace the ones they bought several months ago except of the age difference of iPhone owners and Volt owners. Don't tell me the iPhone would improve the productivity after they have wasted one night camping in the cold.
They want to be the first one in their town to own a Volt and show the world they're green conscious (that is debatable). The obsolete battery is not bio degradable and will harm the environment. I also wonder how often you need to replace the battery. It boosts their social standing and 'prestige' for some. It is not for me even if I had the money. Well, it could save them money by visiting a psychiatrist to boost their ego and most likely a prostitute could do a better job for less. J
There are a very small number of folks buying the car for the good of the environment. It is debatable as I said before. There is no convincing figure that it will reduce carbon dioxide emission significantly even when 80% of all cars are electric. However, I have to thank the first wave of electric car owners and the government rebates. Without them, we will never have a truly usable and affordable electric car in the future.
The battery technology is evolving and M.I.T. has a very promising technology. It may take at least 10 years for M.I.T. folks to deliver the next breakthrough from a research project to a commercial product. Until they prove the battery is 100% safe, you’re advised to take the extra insurance among a list of options. J
Estimate how many miles you drive in a year to calculate how much money you save in gasoline. Most likely it will not pay back the extra investment / maintenance (two drive trains until we have a pure electric car) / reliability, the extra electricity bills, the inconvenience of charging (your time as a Volt owner must be more expensive than the time of a Corolla driver), finding a qualified mechanic (except from the dealer who will charge you a bundle), the tickets for driving too slowly, the increased chance of hitting something due to no warning sound...
Why folks buy it besides the rebates from the government (at least at one time)? It is the same folks camping in line to buy the new iPhone to replace the ones they bought several months ago except of the age difference of iPhone owners and Volt owners. Don't tell me the iPhone would improve the productivity after they have wasted one night camping in the cold.
They want to be the first one in their town to own a Volt and show the world they're green conscious (that is debatable). The obsolete battery is not bio degradable and will harm the environment. I also wonder how often you need to replace the battery. It boosts their social standing and 'prestige' for some. It is not for me even if I had the money. Well, it could save them money by visiting a psychiatrist to boost their ego and most likely a prostitute could do a better job for less. J
There are a very small number of folks buying the car for the good of the environment. It is debatable as I said before. There is no convincing figure that it will reduce carbon dioxide emission significantly even when 80% of all cars are electric. However, I have to thank the first wave of electric car owners and the government rebates. Without them, we will never have a truly usable and affordable electric car in the future.
The battery technology is evolving and M.I.T. has a very promising technology. It may take at least 10 years for M.I.T. folks to deliver the next breakthrough from a research project to a commercial product. Until they prove the battery is 100% safe, you’re advised to take the extra insurance among a list of options. J
I’m very absent minded. Many days
I may have to call my boss that I cannot come to work as I forget to charge or
I may drive the car with the charger on that could do some harm to the car, the
charger or the house (hopefully it would not burn it down).
I also wonder how long it takes
to drive an electric or a hybrid car from Boston to Washington, D.C. (including
the time to recharge) for my family vacation. It could be a nightmare just
planning where and when to find a charger.
126 Tesla
As of 8/8/2013, the stock price
of TSLA is $155. The performance has been amazing 350% YTD. It is a stock rocketing higher and higher.
Is TSLA a good investment?
From the fundamental metrics, it
is not. The expected P/E is 150 and ROE is -360%. I seldom invest on stocks
with P/E over 40. However, the outlook of the company is very rosy and the
rising stock price indicates it could revolutionize the auto industry. It is
possible, but do you want to bet on it?
My preference is “Buy low and
sell high” as opposed to the current stock holders’ “Buy high and sell higher”.
Common mistakes of retail investors:
1. Investing
in a company is different from investing in a company’s products. Many Tesla
owners own the company stock.
2. Potential
appreciation of a stock has nothing to do with its past performance. Will have
another 300% return? Most likely, not. If the chance to decrease by $100 the
same chance to increase by $50, I do not buy.
3. When
the trend (all three simple moving averages in finviz.com indicates the trend
is up), selling short is against you even if you have good argument. Do not
swim against the tide especially in short term trade.
4. Your
profession (or expertise) could bring you bias in making investment decisions
in a company related to your expertise. I had many high tech friends betting on
internet stocks as they ‘knew’ better.
It is similar to your origin of nationality. When you were
born in China, it does not mean you’re an expert in Chinese stocks.
The Business Model
Building super charge stations
for the current owners to use free after a small initiation fee is a reversed
business model of giving razors free but making money on the blade. The latter
proves it works, but there are not too many beneficial precedents for the
former model.
Tesla, the car
Tesla is an electric car. The
current model is about $80,000 (not a typo) and the new model will be about
half that. It still has similar problems as the Volt except with one simple
drive train. The problems are:
1. The
service stations are built for free charging after an initial fee. Are they
really free? It will be great for the
owners if the company will not be bankrupted from its shaky financial state.
Same for sending mechanics to your house to fix your car. I hope they will
prosper as I cheer them from my cheap seat.
2. The
charging range for the average owner is far worse than the range under ideal
conditions and it will never be close to the range of cars using gas. Is the
extra cost for larger battery worth it to an average driver?
3. The
other problem is some states do not (or will not) allow selling a car there
without a dealership. It is costly to build a dealership network.
4. My
estimate is $10,000 rebate per car sold by Tesla from the government. Will the
government subsidize them forever? It is not a big deal now as the number of
cars they are selling is still small.
5. It
will appeal to folks driving a lot of miles in a year and/or when the gas price
surges. I drive about 8,000 miles a year and it will never pay back for the
extra cost ($80,000 vs. $23,000 for my Honda CR-V). Hope the $40,000 Tesla
would make a big difference.
6. Even
if the company is making easy money in selling the carbon credit, it will
still have big losses in the coming years.
The link is http://en.wikipedia.org/wiki/Carbon_credit.
Musk
Musk is very brilliant in pumping
up the stock. He will sell it without the restrictions in the loan after he
paid it back to DOE. The last owners of this stock could be the biggest losers
if it heads south. I could be wrong in the timing but not wrong in the
fundamentals of the company.
I sincerely wish he and his
company will be successful and I were wrong. Only time can tell. For my own
money, I prefer to buy low and sell high. It is just me. If you want to buy
high and sell higher, you should protect your investment with stop order. Also,
adjust the stop when it appreciates.
Afterthoughts
More on Tesla.
http://ebmyth.blogspot.com/2013/11/more-on-tesla.html
Links
127 First Solar
I have a lot of doubts in this
company. Some of my fellow commentators giving rosy outlooks could be the hedge
fund managers or retail investors holding a lot of this stock. Their arguments
of investing in this stock do not make a lot of sense. Even if it has potential
appreciation as stated in the article and the comments, it is too risky by many
fundamental metrics. The company is losing a lot of money and the outlook of
solar industry is cloudy except banning the Chinese solar panels from coming
in.
This stock has been recommended
by many well-known subscription services. Most followers lost money. My advice:
Analyze the company with an open mind on any recommendation and understand the
hidden agenda of the writer. There are many articles in the web are just
controversial. This company will rise for the following reasons: 1. Not letting Chinese solar panels or 2. Energy
(oil and gas) cost rises.
Here are my negatives on this
company:
1. They cannot compete with Chinese companies if the protectionism
is lifted. Some companies in Europe produce better products. Hence, they depend
on local sales and tax rebates.
2.
Solar is still
expensive if oil is below $100 in most regions of the USA.
3. Shale oil and gas could make solar impractical in most areas in
the USA. The time frame for shale energy is 5 years from now (as of 3-2013) if
they can solve the environmental problem and set up the pipelines.
4. How many previous losers (there is a lot) on this stock will
return? More importantly, how many investors find its potential appreciation
attractive?
5. The company is losing money now.
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