Living Small and Large.
N e w adds to Our Portfolio: Huntsman International call options(HUN 2.10, 1-19, $30.00 strike), Alibaba–BABA,
Even newer cuts–Netflix, Brinks–huh?
Small risk/re-balance shaves–Amazon, Facebook.
Below find our current holdings, really. The first three form our slightly larger positions. We invest long-term, 2 years or greater. Markets go both ways, yet some of our future can be seen clearly now. That is our target. We also realize that we are not strictly diversified. Quite clearly, we position radically for trend-driven secular shift(e-commerce, SVOD, etc.) All dividends are reinvested. Our average time horizon is now 11 years. Our holdings include 7 equity positions, call options, and cash(averaging 10%.)
Conference Call Ratings
Good calls make great buys possible.
When you can’t understand what your company is saying, you’re screwed.
Which companies help.
Which companies hide.
StockJaw’s new “CCR’s” provide any readers with a single rating for earnings conference calls. Are calls easy to follow(4 Stars), or a morass of info meant to mislead(1 Star)? Many calls can be difficult to understand, or less then fully forthcoming. Industry jargon and acronyms abound. Some simply tell it like it is–Netflix is the best. Amazon is aloof and often mute. Our rating system is 1-4 Stars, with 4 being the easiest to understand, 1 being nearly opaque. Some companies are inherently hard or even impossible to understand, thus uninvestable. Master Limited Partnerships(MLP’s) and Morgan Stanley are the worst.
StockJaw believes it is necessary to understand the businesses within which your chosen companies operate. Investors want companies that are shareholder friendly. If management doesn’t take its’ earnings calls seriously, they don’t take their shareholder base seriously. If you can’t or don’t understand the business, you don’t know your holdings. Kaboom. That’s why we rate them.
“Crooked Hours Report.”
T h e entire strategy of investing is to be there when it’s good, and be gone before it’s not. That means identifying potential threats in advance. Long-term investing calls for long-term looking. Companies operate according to business models, and planned growth paths. Cracks eventually appear in every model or plan, even for our very best businesses and companies. The “Crooked Hours Report” has arrived. When cracks form in otherwise bullet-proof business models/growth paths, such paths become crooked, and harder to achieve.
Solely watching for problems within your companies is not enough. Anticipation of problems is key. Our report is designed as a bullet-point list of exactly what to watch, and look for. Quickly learning and acting upon formative events, prior to price moves, is what investing is all about. That’s why StockJaw now launches our
“Crooked Hours Report.”
Crooked Hours Report–Macro.
I n our opinion government intervention remains the single largest threat to the majority of our portfolio–Amazon, Facebook, Alphabet, and Alibaba. The Economist(Nov. 4, ’17) reports that between 1970-1999, U.S. anti-trust regulators averaged 16 lawsuits per year. Between 2000-2014 their average dropped to 3, a greater that 80% reduction.
Any legislative attempt to regulate these uber-powerful companies will likely result from an event raising congressional “concern,” followed by public outcry. For example, the streaming of a murder on FB Live resulted in palpable public concern and a flurry of sensational news accounts. Everyone witnessed the upset. Yet FB Live also provided clear and damning footage of a police shooting many yet feel was criminal. As of now, people find far more benefit than concern. That’s good, and we think a more stable and lasting view. But things change. Attitudes shift. When the public begins to view these four companies as a threat–which they will–regulation won’t be far behind.
However, any legislative attempt to regulate AMZN, FB, or GOOGL/GOOG, could prove very difficult. Can you imagine the legal teams any of these companies would build? Think U.S. vs. Microsoft. When the U.S. attorney threatened legal action, Microsoft’s unspoken response was “bite me,” and Bill Gates meant it. MSFT proceeded to fight the entire federal government to an embarrassing frustrating draw. Fed prosecutors hate losing more than doing nothing.
Donald Trump routinely speaks with a pro-business tone. Nonetheless, he has already clashed personally over Twitter with Jeff Bezos–AMZN, referring to the company as a monopoly. Bezos did not reply diplomatically, and humiliation is never a solid strategy. Similar statements have been directed at Facebook, in particular focusing on the streaming of homicide on FB Live, Russian election interference via FB, the general rise of fake news, and the “echo chamber” effect on public perception. Many call it a “utility,” along with Google search.
If people start doing this over FB, Alphabet, or AMZN, regulation can’t be far away.
The senate has already cooked a legislative intervention they call the “Honest Ads Act.” On November 1,’17 top executives from Alphabet, Facebook, and Twitter testified before members of the U.S. Senate. These high-profile hearings focused on Russian use of these three platforms to interfere in U.S. elections. “This is the national security challenge of the 21st. Century” commented Lindsey Graham(R-South Carolina.) Federal prosecutors are like lions. They test the water by targeting the slow and weak first. That means Twitter.
Wins in big cases launch political careers. Think Rudy Guiliani–fed prosecutor and multi-term NYC mayor. Amazon, Alphabet, and Facebook, sit in the government’s cross-hairs on a daily basis, as obvious targets but hyper-dangerous to attack. Depending on what these companies do, that balance could shift at any time.
Alphabet’s current anti-trust concerns lie in Europe. The EU has already sued and fined Alphabet $2.6b. They have also sued Apple for $15b. Alibaba operates solely at the whim of the PRC and it’s shifting political directives. All of the above rank as leading concerns to the ongoing success of these four massive companies, and thus our stake in each.
1. Amazon–(NASDAQ: AMZN) IT, Internet, Direct Marketing.
Be there with StockJaw in the end–when AMZN does everything everywhere.
Amazon remains the epic growth stock of the age. Founder/CEO Jeff Bezos is doing what the Soviets couldn’t. AMZN is taking over the world, but in such a way that they become integral to non-retail industries. Amazon doesn’t want every industry. They want to sell goods and services to every industry. “Look regulators–no monopoly.” Forget the P/E on AMZN. Buy on a 3%-8% pull-back, if not bad company news. Amazon passes on a lot of conference call questions.
StockJaw blurrin’ it to our broker for another maw-full of Amazon, before it’s too late. Few things are this simple.
On July 11th StockJaw called–“AMZN, BUY below $950.00.” AMZN opened that day at $993.00. Forty-one days later AMZN hit our buy price. Five weeks after that, on 9-26-17, it hit an intraday low of $931.75–the cheapest since our “BUY” call. Which means we called 98.2% of the discount for AMZN that the market provided. It’s now $1156.16. If purchased at our $950.00 call, it translates into a 21.5% move in eight weeks.
Amazon’s hometown. 1903 Pike Place Market over-looking Elliot Bay, Seattle.
Savvy-up with our unzipped twin takes on World Killer Amazon:
“That Smiley Amazon Show.”
or “‘Follow That Crowd?’ Amazon Prime Day Pump.”
15% of Total Equities Held.
Our cost basis: $637.26.
Morningstar fair value; $1250.00.
AMZN’s big tell remains Prime memberships. After revenue, they report a metric they call CSOI(consolidated segment operating income.) On calls AMZN provides mostly general info/color. Read the press releases first. Q3’s call was short, loud, glitchy, and chaotic.
Amazon Investor Relations:
StockJaw.com Conference Call Rating: 2 Stars.
AMZN–Crooked Hours Report.
1. Anti-trust regulation. Amazon’s size, increasing reach, and rail-dragster growth, make it a prime target for regulators. Regulation is often a political ploy, rather than consumer protection. Amazon is for sure the nail to be beaten down if consumer sentiment shifts.
2. Execution risk. AMZN continues to startle. No company in human history has expanded this broadly, and this far. AMZN wants the world and they’re going for it.
3. The rebirth-hard of Wal-Mart. The purchase of Jeff Lore’s Jet.com is transforming WMT’s entire online presence. It’s working–big time. Jet.com’s model rewards shoppers with both lower shipping and item costs. How? Customers save when selecting regional sellers, buy more, and are willing to wait, thus allowing sellers time to bundle orders efficiently. It works. WMT’s revenue displays as much.
2. Alibaba–(NYSE: BABA) IT, Internet Software & Services.
Alibaba is the Amazon Storm of the East, with maybe an even better business model.
Alibaba is the Jaw-dropping Chinese corollary to Amazon. Widely viewed as an eCommerce giant, Alibaba more accurately is a market creator. It creates the digital marketplace bringing together both buyers and sellers. Unlike AMZN, Alibaba does not own/sell merchandise, nor does it need a stupefying network of fulfillment centers, or a military-equivalent logistics wing, to service operations. Along with great potential, Alibaba is a Chinese company, subject to both shifting Chinese political whims, and investor information quality and quantity issues.
The new dynasty of commerce. Will Xi Jinping absorb Hong Kong?
12.4% of Total Equities Held.
Our cost basis: $158.68.
Morningstar fair value; $175.00.
Alibaba Investor Relations:
BABA–Crooked Hours Report.
1. Alibaba faces the constant threat of government intervention. This is a very real threat. Never doubt the seriousness of the Chinese leadership. No one messes about in the PRC and gets away with it.
2. BABA operates in a legal grey area within Chinese law. Direct company ownership is complicated in the PRC. Thus BABA’s share ownership structure is a maze, despite its’ ADR(American Depository Receipts) status.
3. Alphabet–(NASDAQ: GOOG, GOOGL) IT, Internet, Software & S.
The EU’s $2.7b. anti-trust fine is the cost of doing business for Alphabet. That issue irons out over time. They have $90b. and own 90% of EU search. No competitor stands in position to threaten Alphabet. Love this oligopoly search/advertising juggernaut, and mother of Waymo. Who knows what else co-founders Page and Brin may cook up in that backyard they call Other Bets? Mash the link for our full report on Alphabet, after the arrival of “Ruthless Ruth.”
Our sweeping and nuts and bolts look at Alphabet:
“Google–What are they up to in there?”
13.8% of Total Equities Held.
Our cost bases: GOOG $605.98, GOOGL $680.90.
Morningstar fair value: $910.00.
A grip on digital advertising helpful–like ‘programmatic.” Google it.
Alphabet Investor Relations, such as it is:
Alphabet sports perhaps the worst Investor Relations website we work with. iTunes users might like it.
StockJaw Conference Call Rating: 3 Stars.
Alphabet–Crooked Hours Report.
1. Alphabet faces the same anti-trust concern as FB, or AMZN. Google owns search, particularly in the United States and Europe. The EU has been conducting an unending battle against Alphabet, for years. Late this summer the EU levied a $2.7 billion fine against Alphabet for unfair trade practices relating to its’ displaying of shopping results. The EU claims the company massages search results. Probably. Google could eventually be seen as a “utility” and perhaps be regulated along those lines.
2. Concern also exits around Alphabet’s “dependence on search and advertising.” We do not share this notion. Alphabet’s uniquely structured business incubator model houses Waymo(self-driving cars), Nest(groovy IOT homes), Verily(longevity/life science), Loon(balloon-borne internet delivery), Fiber(unaffordable high-speed internet), Glass(connected wearables.)
3. We have voiced concern surrounding the sheer number of ideas pursued by the company. How many is too many? How much money will they throw into yet unprofitable notions? Yet watching Amazon’s unfathomable expansion into everything has lessened our worry. The rise of Waymo is also very encouraging. Besides, Alphabet’s cash-filthy.
4. Facebook–(NASDAQ: FB) IT, Internet, Software & Services.
Facebook remains a phenom. FB owns mobile connectedness. FB monetized mobile. They draw top talent. They will own mobile video messaging and chat, maybe VR. Good conference calls–a little promotional. Really like Sheryl Sandberg. Love or hate him, Mark Zuckerberg is brilliant and killing it–takin’ a party year off from Harvard.
9.5% of Total Equities Held.
Our cost basis: $108.01.
Morningstar fair value; $155.00.
Digital advertising is their business. it’s involved.
Facebook Investor Relations:
StockJaw Conference Call Rating: 3 Stars.
FB—Crooked Hours Report.
Increasing scrutiny of FB’s massive content is creating more difficult questions for the company. Early in FB’s history many observers felt the platform would aid in political understanding, and perhaps cooperation. Instead Zuckerberg and crew now face a pair of long-term threats. Welcome to FB’s Crooked Hours.
1. Legislation forcing FB to further police it’s content. Ideas are brewing, including the new senate bill known as the “Honest Ads Act.” Zuckerberg/FB has stated flatly that such a law would “increase costs dramatically.” In addition, the prospect of lawsuits and ugly publicity also come in this mix.
2. Anti-trust legislation. FB’s reach is unprecedented–approx. 2 billion monthly active users. Media buzz concerning the “echo chamber” continues unabated. FB Live also brings scrutiny for it’s failure to fully police or block unacceptable content, such as homicides. Politicians are drawn like roaches to anything garnering any real wide public concern. FB’s reach qualifies–big time.
5. Activision-Blizzard–(NYSE: ATVI) IT, Software.
Activision-Blizzard will replace lost revenue from declining World of Warcraft. subs.
Activision is the model for the E game industry. Enduring engagement is their mantra, and they pioneered the path. It works. All follow ATVI’s model now, and they’re getting better at it. Yet, heard of e-sports, or World of Warcraft, Call of Duty, Overwatch? TTWo and EA are also great “3rd party publishers.”
9.1% of Total Equities Held.
Our cost basis: $38.53.
Morningstar fair value; $42.00.
Fully informing, yet promotional, like Kevin Plank over at UA.
Activision-Blizzard Investor Relations;
StockJaw Conference Call Rating: 3 Stars.
6. Lockheed Martin–(NYSE: LMT) Industrial, Defense.
You want this–but you want it cheap? Really?
LMT 2016–37% of revenue came from government contracts for which LMT was the sole bidder. That’s like being spotted 37 points. CEO Marillyn Hewson is leading LMT toward greater strength. Conference calls are super clear, direct, non-promotional, and efficient. LMT, a stable 5%-8% grower with a low .61 beta(volatility), and a 2.61% annual dividend yield–at current share price $277.61. Trump? He likes both defense and Lockheed Martin. Look inside with our 4th of July report on Lockheed Martin, “Lockheed in Trump Land.”
Lockheed-Martin’s in the sweet-spot. We though Trump would love this stuff. He does. Who better to pimp your product than the president? Both foreign tours so far were arms sales with diplomatic grease.
Savor our report on Lockheed in Trump Land:
9.16% of Total Equities Held.
Our cost basis: $254.65.
Morningstar fair value; $279.00.
Awesome calls. Clear, forth-coming, and inclusive.
Lockheed-Martin Investor Relations:
StockJaw.com Conference Call Rating: 4 Stars.
LMT–Crooked Hours Report
Lockheed Martin is in the sweet spot. The current Washington attitude toward defense in extremely bullish for all defense contractors. Yet concerns exist.
1. Sequestration. Sequestration mandates government department budget reductions without discrimination. It’s a budget deficit mechanism. It’s mechanical, and once in place must be actively counteracted to prevent its’ savage across the board program cuts.
2. The debt-ceiling vote. Within weeks Washington will be required to confront all budget items in light of the debt ceiling. For spending to continue the ceiling must be raised, again. No guarantee of passage exists, and this play clock is ticking down.
7. United Health Group–(NYSE: UNH) Healthcare, Providers.
United Health is best in class health care management, and pharmacy benefits manager(pbm). Love or hate such companies, UNH has displayed adaptability in a rapidly shifting marketplace. They probably have some of your money. Why not get some back?
8% of Total Equities Held.
Our cost basis: $177.76.
Morningstar fair value; $143.00.
United Health Group Investor Relations:
Huntsman International LLC.,(NYSE: HUN). Materials. Chem.
Huntsman International makes performance chemicals including polyurethanes.
BOUGHT; HUN 1/19/2018, 30.00 c(strike), call options.
Premium paid, $21o.00 pre contract(100 shares).
StockJaw bought HUN, $2.10 premium, 1-19-18 expatriation call options. Buying call options provides the buyer the right, but not the obligation, to purchase 100 shares of a stock, at a predetermined price–the “strike price.” Our strike price here is $30.00. Our “contract,” equaling 100 shares, lasts until January 19, 2018. This allows time for the share price to move. Our break even point is $32.15sh. with commission. As you see, out share price must move up only 3.2% for us to even out. Not far to go and lots of time.
StockJaw.com Conference Call Rating: 4 Stars.
Huntsman International LLC., Investor Relations:
FRESH PORTFOLIO CUTS
What’d they grind up and ram into your stock? “No GE bologna thank you.”
UPDATE; 10-10-17: Last week we sold our remaining piece of a long-term NFLX position. By rule of thumb and volatility, we’d taken profits, ultimately too early. The stock simply continued climbing, leaving us with a strong yet partial piece. Time to punt. We sold out at $191.02sh., netting an 89%, total return. NFLX remains on our watch list, too expensive on merits, and too expensive in this elevated market. Love Reed Hastings, the thesis, but pass for just now.
Netflix–(NASDAQ: NFLX) IT, Internet & Direct Marketing.
Netflix continues to lead the world in streaming video on demand–SVOD. With founder Reed Hastings driving Netflix has become a household name and gone world-wide. NFLX’s data ball leads the industry–way. Read our extensive coverage of NFLX in “Pirates of Coax. Cannon Fire.” Flashing global last year, Netflix is building internet coverage and speeds in places such as Sao Palo, Brazil. Build it and we’ll beam it. Now here’s your new credit card so you can subscribe. Changes to net neutrality may undercut the NFLX thesis. That possibility is big. We’re staying, for now. Great conference calls. Clear, direct, and non-promotional.
Our cost basis: $100.99.
StockJaw.com Conference Call Rating: 4 Stars.
NFLX sets the standard for great calls. Netflix’s calls are video yo, and smooth. Stay tuned for CEO Reed Hastings’ follow-up comments, which automatically follow the Q&A. He’s mischievous–“Sorry about the volatility,” Reed once chirped with a grin.
Netflix Investor Relations:
Now 0.0% or our portfolio.
UPDATE: 11-01-17. StockJaw Exits Brinks. Shareholder selling gaps shares down nearly 9%, then below a flattened 50-day moving average. This Q3, ’17 earnings price cascade in our opinion clearly displays the unhealthy level of shareholder expectation for BCO. That’s shareholder sentiment. On the fundamental side, Q3 shows Brinks’ stepped-up growth is real and their business is growing in all segments. Brinks’ growth is both global(operating presence in 100 countries) and also balanced, 50/50 organic vs. by acquisition. GAAP revenue up 12%y/y. On the downside, shareholders sold this quarter with crazed abandon and they remain arms-crossed sullen.
We love the mutt, but we’ll let someone else feed him for a while. What happened with BCO? What technical heal might bring us snapping back? Savor all in our “Think Tank. Back From the Bunker Report.”
Brinks–(NYSE: BCO) Industrial, Commercial Services.
“I know what you’re thinking…”
Brinks is precisely who you think they are–the 157 year-old security company. Brinks is an international player in secure transportation of cash and other valuables, a cash processor, and other cash management services. Out of three main players, Brinks is the dominant player in three of the ten international categories within which they operate. Brinks is second in the remaining seven.
Read our launch piece on Brinks:
“What to say when a 157 year-old gets serious.”
0% of Total Equities Held.
Our cost basis: $75.51.
Sold at $75.85.
StockJaw Conference Call Rating: 4 Stars.
Great. Super clear. Good slides. Brinks is an easy to understand company/industry and they tell it straight.
Brinks Investor Relations:
CASH —22.4%, up from 5%. This market is overdue for a correction.
U.S. Dollars. Preferred range 10%-40%. Cash held outside IRAs held in CDs. It counts and it’s good drill. We do not hedge or use FX markets.
StockJaw is working to bring you even greater perspective.
When we buy or sell you’ll find it right here.
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