Archive for February, 2007

Starbucks stock (SBUX) and the CEO’s memo

Sunday, February 25th, 2007

Howard Schultz, the Starbucks chairman, hurt his own company’s stock with a memo about Starbucks losing its way. There’s no doubt that Starbucks is no longer unique but that’s the normal progression of things.

According to Seth Godin’s Purple Cow reasoning. When you create something original and it becomes popular (and Starbucks started off as basically the only place to go for fancy coffee) you then cash in. By cashing in you make it less original. But you make more money and making money is something the unoriginal Starbucks has been very good at doing.

Perhaps that’s why David Gardner recommends SBUX:

First mover: A head start that might be insurmountable.
Best in big market: A top dog in a red-hot industry.
No escape: A brand worming its way into our culture.
Killer product: A product that blows away all rivals.
These four should more than get you started. And naturally, there will be some overlap among them, but any company demonstrating even one of these traits is worth digging into. For now, take a hard look at these classic Rule Breakers.

Electronic Arts
Federal Express
Starbucks (if you don’t already own it).

If you’re looking for a more speculative play, consider Akamai in the Net space or PDL Biopharma in biotech. And, by all means, keep an eye on the new direction and turnaround at TiVo. All three face challenges ahead but all could still prove to be speculative Rule Breakers.

PDL Biopharma

I don’t own Starbucks. Perhaps I should; the CEOs worries seem pointless to me.

UNAM and other lesser known stocks

Thursday, February 22nd, 2007

Motley Fool recently wrote about 4 stocks that Wall Street mostly or entirely ignores:

Healthstream (Nasdaq: HSTM)
National Research (Nasdaq: NRCI)
MoSys (Nasdaq: MOSY)
Unico American (Nasdaq: UNAM)

These meet 1 of Peter Lynch’s criteria in that they are still ‘under the radar’. If Wall Street analysts paid more attention to these stocks you would see higher valuations making them more likely to be good value picks now. That’s not to say that no one owns these stocks. Take a look at the major holders of UNAM for instance.

Anyway, just a few ideas for you to look into. Remember to do your research. The Peter Lynch criteria that isn’t being met (at least by me) is that when you buy a stock you’re supposed to know something about what the company does and why it will succeeed.

Finanical brokers out for themselves? Bad PNC experience

Wednesday, February 21st, 2007

A friend of mine had always been a pro-banker type guy, but recently, he had some problems with his financial brokers:

Some things have really, really left a bad taste in my mouth with these brokers (Merill Lynch, Morgan Stanley, etc..) First, a supposed friend from high school puts my money in a stock. He then begins moving the money to different stocks without my consent, I assuming to make himself fees. He also told me the account had no penalty for withdrawing the money, but that wasn’t true.

Then these other two guys from PNC told us that these annuities would make 4.5% or something like that, and they ended up getting 2.5%. They switched to another company because they say Allstate told them it would be 4.5% and then felt lied to. Then they give us these proposals to move from PNC to their new company, none of which makes sense for us at all. Finally, they almost admit that they don’t have a better deal but want us to move the money to keep the relationship with them? You just told us 4.5% and got us 2.5% on a lot of money, and now we should move our money to you to keep our great relationship?

Then my Dad’s boss dies, the widow doesn’t know what is going on, and some financial guy churns her account for tons of money.

Some of these financial guys will buy you dinner, give you tickets to see your sports team play, and be the nicest guys in the world to you..until you have to move money out of their account. As soon as you question something they did or tell them you need money out, they spaz and put intense pressure on you to stay with them. Then their real personality comes out, and boy was it nasty today. Personally for my accounts, just give me ING Direct and give me 4.5% and leave me the heck alone.

A Smith barney employee responed:

Sorry to hear about your situation. There are accounts that brokers offer, in Smith Barney they are called PM accounts, where the broker gets your permission to buy and sell stocks up front. He can then make trades but they are done commisson free as you are paying a quarterly fee depending on size of the the account and the amount of discount the broker offers. Some give none but most these days realize you have to discount in order to compete. I am not sure why they are trying to sell you a fixed annuity in this market. It again depends on the size of your portfolio and what you are looking to do with the money.

I believe you need to sit with the manager in the current office you are in and explain your level of frustration. Not all of us are bad guys – just seems you have ran into a few who have not helped the reputation for the rest of us in the industry. Good Luck in the future. I always tell my clients never buy anything from me unless you understand it completely. Good Luck in the future. Don’t let a few guys get you sorry you were ever in the market. Still the best place to be for you over the long haul.

The economics of Philadelphia

Wednesday, February 21st, 2007

Here’s an interesting article on Philadelphia’s finances. The mayor says they have to cut jobs and that some cuts will necessarily come from layoffs. However he also plans to hire 1,200 new city employees.

I also found the blog of a Philadelphia realtor. If you’ve been following my Philly real estate posts (Philly #2), this blog may interest you.

Barclays introducing new REIT ETFs

Tuesday, February 20th, 2007

Here’s an interesting article on new Barclay’s ETFs that focus on various parts of the REIT index. The new ETFs will be very specialized when they’re ready:

Barclays Global Investors of San Francisco has five iShare ETFs in registration that would follow indexes from the National Association of Real Estate Investment Trusts in Washington: the iShares FTSE NAREIT Residential Index Fund, iShare FTSE NAREIT Industrial/Office Index Fund, iShares FTSE NAREIT Retail Index Fund, iShares FTSE NAREIT Mortgage REITs Index Fund and iShares FTSE NAREIT Real Estate 50 Index Fund.

The article also mentions other REIT-focused ETFs and mentions that REITs have been outperforming the market for 7 years – this could mean it’s a bad time to invest in REITs because they can’t outperform forever…

Philadelphia real estate down in 2006 – what next?

Monday, February 19th, 2007

Here’s a follow up to yesterday’s Philadelphia real estate blog entry. This article says that in Center City Philadelphia, more homes went on the market and prices dropped.

This article explains why some people are very optimistic. We have an expanding Pennsylvania Convention Center, expansion plans by the University of Pennsylvania and Drexel Universities, and the construction of “the skyline-altering Comcast Tower”.

JetBlue Airways stock (JBLU) and cancelled flights

Sunday, February 18th, 2007

It will be interesting to see what happens to JBLU next week and longer term in light of the recent problems. You can read some comments on my travel blog; one person says we should start suing. Another says they will never fly JetBlue because of an expensive flight to Australia.

There’s a good article from the Daily News about the writer’s JetBlue experience. The writer tries to capture what has been making JetBlue successful and what they might have lost.

Is Philadelphia the right place to invest in real estate?

Friday, February 16th, 2007

According to this National Geographic Traveler article, and one I can’t link to because I read it on an airplane, Philadelphia is rebounding. If they are right, real estate prices will increase. There are many reasons, but this is probably the most compelling:

The renaissance of Philadelphia restaurants goes hand in hand with the revitalization of its neighborhoods, John Mariani tells me later. “Restaurants throw light on streets,” says the Esquire food critic and co-author of the Italian-American Cookbook. “Sometimes a single restaurant can revitalize a whole section.” Enterprising restaurateurs like Susanna Foo and her Walnut Street eatery, Georges Perrier and his Le Bec-Fin and, of course, Stephen Starr, are bringing the City Center—and Philly cuisine—back to eminence. “It’s back, big time,” Mariani says.

People walking on the sidewalk make neighborhoods safe. And fun. That means people want to live there, driving up real estate prices.

Cardica Inc. – the problem with stocks you don’t understand

Saturday, February 10th, 2007

Not many analysts cover Cardica Inc. (ticker symbol CRDC) but Standard & Poor’s has a report on this company that says new products in 2008 and 2009 should mean good things for the company. The problem is that I’m in no position to judge how successful these new products might (or might not) be.

In the meantime CRDC came out with earnings today and (no surprise) they are still losing money. The stock is still going down ($5.20 down over 3% today although it was lower in the early afternoon).

For an investor like me there’s no way for me to discern how good Carica’s future products might be. That’s the key with this stock because if this company is going to stop losing money it’s going to be because doctors and hospitals need their products.

This is a perfect example of what Peter Lynch talks about in his book. Someone who operates on hearts would be in a perfect position to estimate how well these products will perform. I guess I’m in the wrong business…

100 best dividend stocks in the S&P 500

Friday, February 9th, 2007

Interestingly, “the 100 highest-yielding stocks of the S&P 500 outperformed the broader index by more than three percentage points annually from 1957 to 2003.”

You can get access to these stocks all at once through the WisdomTreeDividend Top 100 Fund (ticker DTN). Here are a few of the stocks and how much weight they hold in the fund (according to a Motley Fool article): Southern Copper (3.5%), Verizon (1.5%), Citigroup (1.3%), Bank of America (1.2%), Altria (1.2%), Pfizer (1.0%), General Electric (0.9%).

Other holdings include AT&T, General Motors, Regions Financial, Cons Edison Inc. and more. The attraction here is that Jeremy Siegel, the Wizard of Wharton, “demonstrated in his recent book The Future for Investors that the 100 highest-yielding stocks of the S&P 500 outperformed the broader index by more than three percentage points annually from 1957 to 2003.”