Author: Insider Monkey
It’s a well known fact that insiders profit from their transactions. More than 59,000 different insiders made public filings with the SEC in 2009. The year before that, more than 65,000 did. Blindly imitating all of these insiders won’t yield much. Monkeying only the top insiders, the ones who have the best track record, is a different story. Insider Monkey uses a hybrid evaluation system that exploits insider transactions and other market anomalies to reduce the number of insiders who are worthy enough to monkey. Insider Monkey also provides high quality evidence based articles to inform individual investors about the intricacies of investing.
Posts by Insider Monkey:
Posted on 02. Jul, 2012 by Insider Monkey.
s 3D Systems A Good Investment?
By Meena Krishnamsetty
On January 9th of this year, 3D Systems (NYSE:DDD) announced the release of the first-ever three dimensional (3D) printer for consumers. Priced at $1300, about the same as mid-range lap top, the Cube comes out of the box ready to print usable objects in a variety of colors. The company gives you 50 free designs and has launched the Cubify community for 3D hobbyists wherein people can share open-source designs and experience.
Posted on 12. Apr, 2012 by Insider Monkey.
Guest Post By Meena Krishnamsetty
If you’ve been reading articles about hedge fund performance over the past three years, you’re probably thinking index funds are better options for investors. During the last quarter, an average hedge fund underperformed S&P 500 index ETFs by around 8 percentage points. This is a bit misleading though. Actually, equity hedge funds hedge around 50% of their exposure. It isn’t really appropriate to compare hedge fund returns to broad market indices that are 100% long at all times. Hedge funds have been able to outperform the market significantly over the past 5 years. Unfortunately, hedge fund managers took around 47% of their total returns as fees (read the details here). Despite the huge hedge fund fees, investors were still able to outperform the market by 2.5 percentage points per year.
We like hedge funds. We believe hedge fund managers are talented and that they deserve billions of dollars in fees. However, we don’t think it’s a smart move to directly hand over your hard earned dollars to hedge fund managers. This will only help them to become billionaires before you can even think about retirement. A better alternative is to imitate billionaire fund managers’ top stock picks. Insider Monkey constructed the Billionaire Hedge Fund Index last month and reported that this index was beating the market by 4.4 percentage points through the middle of March. Billionaire Hedge Fund Index continued its spectacular performance over the past three weeks. As of April 9th the index is up 17% vs. 10.6% for the S&P 500 ETF. Billionaire fund managers’ top stock picks beat the market by 6.4 percentage points since the beginning of this year. Here are the top 5 stock picks:
1. Apple (AAPL) is the most popular stock among billionaire fund managers. Almost half of them had a large position in Apple at the end of December. Apple is also the most popular stock among other hedge fund managers (see the 10 most popular stocks). The stock gained 57% this year as of Apr 9th. Apple has been an obvious value play for a very long time. At the beginning of last year the market valued the stock as if it was a low growth utility stock. By the end of the summer, low growth utility stocks had even higher multiples than technology stocks like Apple and Microsoft (MSFT). Investing in Apple was really a no brainer. It is still very attractively priced. Billionaires Ken Griffin, David Einhorn, and Stephen Mandel are extremely bullish about the stock.
2. Google (GOOG) is the second most popular stock among billionaire hedge fund managers. The stock lost 2.3% as of Apr 9th. We are optimistic about Google as well. The stock’s 2013 forward PE ratio is less than 13. It is slightly more expensive than Apple but the stock is the undisputed leader of the search business. It is expected to increase its earnings by nearly 20% per year over the next few years. We expect that Google will outperform the market over the next five years. David E. Shaw, Chase Coleman, and Ken Fisher have large positions in Google.
3. El Paso Corp (EP) is the third most popular stock among billionaire hedge fund managers. Carl Icahn hit the jackpot by investing more than a $1 billion before its merger with Kinder Morgan was announced. He had $1.9 billion in the stock at the end of December. This is a merger arbitrage play that returned 13.9% since the beginning of this year.
4. News Corp (NWSA) is the fourth popular stock among billionaire hedge fund managers. This is a conservative long-term play. The stock was a real bargain last summer. Billionaire fund managers were greedy when others were fearful. News Corp underperformed the market this year, returning 7.2% through April 9th. Steven Cohen and John Paulson are among News Corp investors (see John Paulson’s stock picks).
5. Medco Health Solutions (MHS) is the fifth most popular stock. This is also a merger arbitrage play. The stock returned more than 25% this year until its merger with Express Scripts (ESRX) closed in early April.
As you can see hedge funds’ top 5 stock picks performed even better than the rest of their stock picks. These five stocks had an average return of more than 20%. Our billionaire hedge fund managers became billionaires because of their stock picks. Their recent performance shows that they still have their magic touch.
Posted on 05. Apr, 2012 by Insider Monkey.
Guest Post By Meena Krishnamsetty
Insider Monkey tracks nearly 400 long/short equity hedge funds. A small proportion of these fund managers had amazing stock picks that returned an average of at least 30% during the first quarter. King Street Capital’s Brian Higgins was the best performing fund manager in the first quarter (see the list of best hedge fund managers). We should note that we only took into account a hedge fund’s large-cap stock picks. We excluded options and convertible bond positions.
The S&P 500 index returned less than 13% during the first quarter including the dividends. So, how did these fund managers manage to beat the market by at least 17 percentage points. Below you can find the list of top stock picks of these best performing fund managers:
Sears (SHLD) was a top pick for Eddie Lampert, Bruce Berkowitz, and Francis Chou. The stock returned 108% during the first quarter.
Bank of America (BAC) is the second best performing stock in our list. Again Bruce Berkowitz benefited tremendously from Bank of America’s 72% first quarter return. Berkowitz has been a long term holder of the stock and was hurt badly last year after BAC’s huge decline. However, he deserves credit for his conviction. Billionaire John Paulson sold out his giant Bank of America position during the fourth quarter and missed out on its 72% first quarter performance.
Netflix (NFLX) gained 66% during the first quarter. Technology hedge fund manager John Hurley was among the few who were still bullish about Netflix after its 75% plunge from its 52-week high.
Seagate (STX) also returned 66% during the first quarter. Eddie Lampert, John Hurley, and Jamie Zimmerman are among the hedge fund managers with Seagate positions. David Einhorn has a large position in Seagate too. He didn’t make our list but his large-cap stock picks returned more than 24% during the first quarter.
Priceline (PCLN) and Salesforce.com (CRM) are two other technology stocks with more than 50% returns. John Hurley is the only top performing hedge fund manager with positions in these two stocks.
Apple (AAPL) is the most popular stock among hedge funds since the third quarter of 2011 when the stock was trading below $400 (see the 10 most popular stocks). Skeptics have been warning investors to stay away from these hugely popular names because they are likely to experience large declines when hedge funds decide to sell. We have been telling investors that Apple is hugely popular because it is extremely cheap for a high growth stock. The stock returned 48% during the first quarter.
Delphi Automotive (DLPH) is another popular stock in our list. Centerbridge Partners, Anchorage Advisors, and Litespeed Management benefited from its 47% return during the first quarter. Delphi is also a bright spot on billionaire John Paulson’s portfolio. He is one of the largest shareholders of the company.
Gap Inc (GPS) returned 41% during the first quarter. Eddie Lampert had nearly $600 million invested in the stock. Francis Chou also had a small position in the company.
The rest of our list is dominated by financial stocks. Warren Buffett says that he attempts to be fearful when others are greedy and to be greedy only when others are fearful. Buffett was among the fund managers who added or initiated new positions in mega-cap banks like Wells Fargo (WFC), JP Morgan (JPM), Citigroup (C), Goldman Sachs (GS), and American International Group (AIG). Wells Fargo gained 24% and the rest of the stocks gained at least 32% during the quarter. Bruce Berkowitz had more than $2 billion invested in AIG. We never liked AIG but we have been recommending mega-cap banks as long-term investments during the darkest days of last summer.
Posted on 04. Apr, 2012 by Insider Monkey.
Guest Post By: Meena Krishnamsetty
Insider Monkey looks out for long/short equity hedge funds with the best stock picking ability. The reason is simple. We believe we can outperform those investors who surrender 2% of their savings and 20% of their returns for the privilege of turning hedge fund managers into billionaires. Imitating hedge funds have some disadvantages. We get to see hedge funds’ long positions once a quarter and that’s with a 45 day delay. It is also true that they may not even be holding those shares by the time we are buying them. However, we don’t think that makes a huge difference in terms of performance. We follow hedge fund managers who hold on to stocks for long periods of time, so in some cases we even pay a lower price than what they initially paid. We also don’t have to invest in a hedge fund manager’s 50th best idea. We can just pick the top stock picks of best hedge fund managers and may even be able to beat them in their own game. That’s what Alfred Winslow Jones, the father of the hedge fund industry, did.
Here are the best hedge fund managers of the first quarter. Each of these fund manager’s long stock picks in the largest 1000 stocks had a value-weighted return of at least 30%. S&P 500 ETF (SPY) returned 12.7% during the same time period.
1. King Street Capital – Brian Higgins: King Street is the best hedge fund in our database. Their 6 stock picks returned 41.7%. You can see King Street’s (and other hedge funds’ top picks) bu clicking the links provided.
2. Fairholme – Bruce Berkowitz: Bruce Berkowitz is showing investors (and John Paulson) that investing is a marathon. After last year’s terrible performance, his 16 stock picks returned 38.2% during the first quarter.
3. John Hurley – Cavalry Asset Management: Cavalry Asset Management’s 16 technology stock picks gained an average of 37.1% during the first quarter.
4. ESL Investments – Eddie Lampert: Lampert’s top picks pulled back a little bit since we last compiled the list of best hedge funds. However his 8 large-cap stock picks returned 36.9% during the first quarter.
5. Anchorage Advisors – Kevin Michael Ulrich: Anchorage Advisors’ 8 large-cap picks returned 34.9%.
6. Martin Hughes Toscafund Asset Management: Hughes 5 large-cap picks gained 33.1%.
7. Michael Katz Glenrock Global Partners: Katz’s 13 large-cap picks returned 32.1%.
8. Chou Associates Management: Francis Chou managed to find 17 large-cap stocks that can deliver a 31.9% return in the first three months of 2012.
9. Algebris Investments: Eric Halet and Davide Serra’s fourteen large-cap stock picks gained 31.1% during the first quarter.
10. Centerbridge Partners: Mark Gallogly’s 5 large-cap stock picks returned 31.12%.
11. Litespeed Management: Jamie Zimmerman’s 7 stock picks gained31.06%
12. Round Table Investment Management: Ian Banwell’s six stock picks returned 30%. Guess what Ian Banwell’s top stock pick was (it wasn’t Apple!).
Posted on 02. Apr, 2012 by Insider Monkey.
Guest Post By: Guan Wang
Gold stocks are quite popular among hedge funds these days, and with good reason. John Paulson, who is very bullish about gold, made $5 billion by betting on gold in 2010. As of December 31, 2011, the largest position in the 13F portfolio of his Paulson & Co was the gold exchange-traded fund (ETF) SPDR Gold Trust (GLD), in which Paulson had over $2.6 billion invested. Besides Paulson, there were 55 other money managers bullish about SPDR Gold Trust. In total, they had $8.2 billion invested in the position.
Another gold ETF, Market Vectors Gold Miners ETF (GDX), was also popular with hedge funds last year. It was held by 41 hedge funds at the end of last year. In addition to ETFs, hedge funds were also bullish about companies engaged in producing gold, such as Barrick Gold Corporation (ABX) and Newmont Mining Corp (NEM). There were over 40 hedge funds with these two positions in their 13F portfolios at the end of 2011. For instance, David Einhorn’s Greenlight Capital had $60+ million invested in Barrick while Jim Simons’ Renaissance Technologies had nearly $90 million invested in Newmont. Other gold stocks with significant hedge fund interest are Goldcorp (GG), Kinross Gold (KGC), Allied Nevada Gold (ANV), and AngloGold Ashanti (AU).
But, is gold truly worth investing in? Or, is it overpriced relative to other commodities? Let’s check it out by comparing the historical prices of the gold and commodity indexes.
We are going to use spot gold prices and two commodity indexes: S&P GSCI (Goldman Sachs Commodity Index) and CCI (Thomson Reuters Equal Weight Continuous Commodity Index). S&P GSCI is a broad-based index mainly weighted in energy (80%), agriculture (10%), industrial metals (6%), and precious metals (2%). CCI is comprised of 17 commodity futures that are continuously rebalanced to maintain equal weighting. Unlike GSCI, which can overweight the energy sector, CCI provides relatively even exposure to all commodity subgroups (energy 18%, metals 24%, soft commodities 29%, and agriculture 29%).
Gold vs. GSCI
We collected daily data points of spot gold prices and GSCI from January 8, 1991 to March 23, 2012 and plotted the values we obtained (see the graph of gold price vs. GSCI). Gold price and GSCI tracked each other closely before late 2008. After that, the price of gold went up rapidly while GSCI grew at a relatively slow pace. As a result, the gold-price-to-GSCI ratio has gone up to a higher level in recent years. As of March 23, 2012, the gold-price-to-GSCI ratio is 2.37, 25% lower than its peak of 3.18 on February 23, 2009 but still 35% higher than its historical average of 1.75.
Gold vs. CCI
Gold looks a bit overpriced compared with other commodities when using GSCI, an index has higher weight on energy. Now, let’s compare the gold price with an equally weighted commodity index, CCI. Similarly, we collected daily data points of gold prices and CCI from December 29, 1978 to March 23, 2012.Gold prices grew abnormally high in January 1980 to about $850 per ounce due to high inflation, high oil prices, and the termination of the direct convertibility of the dollar to gold. The price of gold has also gone up much faster than CCI since late 2008. Therefore, the gold-price-to-CCI ratio has a peak of 3.02 on December 7, 2011 and it also reached 2.93 earlier on January 21, 1980. As of March 23, 2012, the ratio is 2.89 which is 74% higher than its historical average of 1.66 (see the gold/CCI graph).
Overall, the price of gold has been on an uphill trend over the past decade, but it grew much more rapidly than other commodities only in recent years. Gold market is very liquid and it also doesn’t cost a lot to store it. Gold supply is also pretty inelastic which makes it a good long-term play on inflation. These may be the reasons why investors preferred gold over other commodities. Our calculations showed that gold is overpriced relative to other commodities. This doesn’t mean that gold prices are going to go down though. Considering that there were no supply side shocks after September 2008 that would explain the 100% increase in gold prices relative to commodities we think investors would be better off by betting on commodities and shorting gold.
Posted on 22. Mar, 2012 by Insider Monkey.
1. Apple (AAPL) is the most popular stock among billionaire fund managers. Nearly half of them had a large position in Apple at the end of December. Apple is also the most popular stock among “ordinary” millionaire hedge fund managers (see the 10 most popular stocks). The stock gained 45% this year as of March 16th. We have been extremely bullish about Apple since we started writing here at Trading Deck at the end of September. Apple was the most popular stock among hedge funds at the end of September as well. We have been telling you that technology stocks are extremely undervalued as a sector and Apple had single digit forward PE multiple at the time. Today we are still very optimistic about the stock. Its 2012 forward PE ratio is 13.5 which is still less than the market. This is a stock that is expected to increase its earnings by nearly 20% per year over the next 5 years. It should easily trade above $800 over the next couple of years. Ken Griffin had the largest position in Apple at the end of December.
2. Google (GOOG) is the second most popular stock among billionaire hedge fund managers. The stock had a disappointing performance so far in 2012, losing 3.2% as of March 16. We are optimistic about Google as well. The stock’s 2012 forward PE ratio is 17 which is more than 25% higher than that of Google’s. They have similar expected growth rates though. We think Google deserves a slight premium over Apple because it is less exposed to competition from other search engines. This is not a stock that will go up 50% this year but it should deliver healthy returns over the long run. Julian Robertson and his tiger cubs Stephen Mandel and Chase Coleman are the most bullish fund managers about Google. We should note that Chase Coleman has an excellent track record of picking winners in the internet space and he made more than $1 billion for his investors by betting on Facebook in its infancy (check out Chase Coleman’s other internet stocks).
3. El Paso Corp (EP) is the third most popular stock among billionaire hedge fund managers. Carl Icahn made a bundle in EP by investing more than a $1 billion before its merger with Kinder Morgan was announced. He had $1.9 billion invested in the stock at the end of December. The other fund managers were pursing El Paso as a merger arbitrage candidate. These stocks usually trade at a discount to their announced merger price because investors usually aren’t 100% certain that the merger will go through as planned. Billionaire hedge fund managers made 9.6% since the beginning of this year by correctly betting that El Paso – Kinder Morgan deal will go through.
4. News Corp (NWSA) is the fourth popular stock among billionaire hedge fund managers. When other investors were dumping News Corp shares because of the hacking scandal billionaire hedge fund managers were buying them. The stock recovered all of its loses last summer. It is also slightly outperforming the market this year. Paul Singer had the largest position in NWSA among the billionaires we are tracking.
5. Medco Health Solutions (MHS) is the fifth popular stock. This is also a merger arbitrage play. The stock returned 25.7% this year as of March 16. D. E. Shaw had more than $300 million invested in the stock.
6. Microsoft (MSFT) is the sixth most popular stock among billionaire hedge fund managers. Ken Fisher and David Einhorn had the largest stakes in the stock. Last May at the Ira Sohn Conference David Einhorn called for the resignation of Steve Ballmer and stated that Microsoft is significantly undervalued. The stock gained 38% since then (read the transcript of Einhorn’s presentation).
7. Wells Fargo (WFC) is the seventh most popular stock among billionaire fund managers. The stock’s 2012 gains are around 23.4%, ten percentage points more than the S&P 500 index. Warren Buffett has the largest stake in this banking giant at the end of December. There were 9 other billionaire fund managers with Wells Fargo positions.
Insider Monkey has 30 stocks in its Billionaire Hedge Fund Manager Index and these 30 stocks (see the entire list here) had an average return of more than 16% this year as of March 16. The top 7 stocks that we discussed above performed even better. Five of these seven stocks outperformed the market and they had an average return of 19.9%, vs. 12.3% for the SPY. It is too early to turn this into a trading strategy, but tracking this index is going to be more fun than tracking billionaires’ wealth every 15 minutes.
Posted on 29. Feb, 2012 by Insider Monkey.
Guest Post By: Insider Monkey
We have been tracking the most popular stocks among hedge funds for more than a year now. Hedge funds are known to be short-term oriented but when we look at the most popular stocks among hedge funds we see that they are focused on the long-term more than expected. Apple (AAPL) and Microsoft (MSFT) have been among the top three most popular stocks since at least the end of 2010 (see the 10 most popular stocks at the end of September). This is consistency and both stocks outperformed the market over the last year. For the past two quarters Google (GOOG) joined them. Even George Soros bet more than $150 million on the stock. We are bullish about Google as well. In fact mega-cap technology stocks are trading at very low forward price multiples compared to the market. Apple will probably make around $40 per share in 2012. The stock has more than $100 per share in net cash, so its 2012 price-earnings ratio is a paltry 10 excluding cash. This is a stock that is expected to increase its earnings by nearly 20% for the next 5 years. On the other hand utility stocks that are expected to grow at less than 5% annually have P/E ratios around 13-14.
Hedge funds’ message cannot be clearer. Technology stocks are undervalued and sooner or later the rest of the market will recognize this. Hedge funds are also buying mega-cap banks. Citigroup (C) is the most popular financial stock followed by Bank of America (BAC) and JP Morgan (JPM). Warren Buffett’s favorite Wells Fargo (WFC) is the fourth most popular bank and ranks ninth overall. Another stock that is trading at a ridiculously low multiple is David Einhorn’s favorite General Motors (GM). For the past 10 years hedge funds’ top 10 stock picks managed to beat the market by around 2 percentage points annually. It isn’t too much but it sure is better to buy these stocks in your IRA account than an index fund. Check out the rest of the list yourself. This list is based on the fourth quarter 13F filings of 375 hedge funds and prominent stock pickers followed by Insider Monkey. Here are the 10 most popular stocks among hedge funds:
1. Apple: 127 hedge funds, $16 billion
2. Google: 108 hedge funds, $10.9 billion
3. Microsoft: 95 hedge funds, $6 billion
4. Citigroup: 92 hedge funds, $4.8 billion
5. Bank of America: 85 hedge funds, $2.3 billion
6. General Motors: 80 hedge funds, $2.2 billion
7. JP Morgan: 79 hedge funds, $4.6 billion
8. Pfizer (PFE): 69 hedge funds, $3.5 billion
9. Wells Fargo: 68 hedge funds, $15.3 billion
10. Qualcomm (QCOM): 64 hedge funds, $4.1 billion
Posted on 27. Feb, 2012 by Insider Monkey.
Guest Post By: Insider Monkey
Inside information pays. Corporate insiders usually have access to material non-public information about their companies. They sometimes trade illegally on such information and make great profits. Some of them were investigated, caught and sent to jail, but there are still many other insiders trading in the grey area and they never get caught. In fact, insiders do not have to act directly on material non-public information to benefit from it. They can delay their purchases if they know negative news is about to be released. On the other hand, ordinary investors who do not have access to inside information will still buy the stock and lose money. As you might have guessed imitating insider purchases is potentially a very profitable strategy. Academic studies have also shown that insider purchases manage to beat the market on the average.
In this article, we are going to discuss the large-cap stocks that insiders are buying recently. All companies have at least $10 billion market cap and were purchased by at least one insider over the past two weeks.
CVS Caremark Corporation (CVS): CVS was bought by one insider over the past 10 days. On February 13, Per G.H. Lofberg, EVP and President at CVS, purchased 46,400 shares of CVS at $42.99 per share. CVS was closed at $44.01 on February 21, up 2.4% from the price at which Lofberg purchased. During the same period, the S&P 500 index returned 0.82%. CVS is also a popular stock among hedge fund managers. At the end of the third quarter, there were 41 hedge funds with CVS positions in their 13F portfolios. Billionaire Warren Buffett’s Berkshire Hathaway had nearly $300 million invested in CVS at the end of last year. Jacob Gottlieb, David Einhorn, and Bill Miller’s Legg Mason were also bullish about CVS.
We are optimistic about CVS. We believe that the company is going to gain additional market shares and continue to be the industry leader. We also see robust revenue and earnings growth in CVS. For the 13 weeks ending December 31, 2011, the company reported total revenue of $28.3 billion, up from $24.6 billion for the same period in 2010. Net income also increased from $1.03 billion, or $0.74 per share, to $1.06 billion, or $0.84 per share. We think CVS will continue to have double-digit growth rates over the next few years. In fact, analysts estimated that CVS’ EPS will grow at 11.89% per year over the next five years. CVS’ forward P/E ratio is 11.96, so its P/E ratio for 2014 is 9.55. CVS’ main competitor Walgreen Co (WAG) also has a low 2014 P/E ratio of 9.45.
Dominion Resources Inc (D): D was also bought by one insider during the past 10 days. On February 14, Director Robert Jepson bought 10,000 shares of D at $50.289 per share. D was closed at $50.14 per share on February 21, nearly 15 cents lower than the price Jepson purchased at. Despite that, we are still bullish about D. Previously Jepson bought 10,000 shares of D on Valentine’s Day, and another director, Mark Kington, also purchased 25,000 shares at $49.82 on February 10. Additionally, Kington and three other insiders also bought 17,800 shares of D in total at around $49.5 per share at the end of January. There were also a few hedge funds bullish about D. At the end of the third quarter, there were 14 hedge funds reported owning D in their 13F portfolios. Jim Simons’ Renaissance Technologies had over $30 million invested in D at the end of last year.
We like Dominion’s focus on its core business and its expansion and growth plans. We also like the high dividends the company pays to its shareholders. Dominion has been increasing its dividend payouts for 9 consecutive years. Its current dividend yield is 4.18%, more than doubling that of 10-year Treasury bonds. D also has an attractive forward P/E ratio of 14.63 and its EPS is expected to grow at an average of 5% per year over the next five years. So its P/E ratio for 2014 is about 13. The main competitor of D is American Electric Power Co Inc (AEP), which also has an attractive forward P/E ratio of 12.15. We recommend Dominion Resources as an alternative to 10-year Treasury bonds.
Another large-cap stock with recent insider purchases is Time Warner Inc (TWX). Director William Barr bought 2624 shares at $37.9343 per share on February 17. This insider purchase is relatively small, so we do not think it deserves a closer look at this moment. But we will be tracking the stock closely and report any additional purchases by the same insiders or other insiders promptly.
Posted on 13. Feb, 2012 by Insider Monkey.
Guest Post By: Renee OFarrell
Cloud computing is the biggest thing since smart phones. The ability to store all your media and files in a “cloud” makes syncing between devices a snap and collaboration easier than ever – and, besides, it’s just plain cool. So, it’s no wonder that so many companies are chomping at the bit to get involved. Amazon (AMZN) offers a cloud service that it debuted by giving its Prime members a free year-long trial, and Apple (AAPL) has its iCloud, made standard on its iOS5 and OSX Lion. Then, there are the companies that just do cloud computing, like the privately-held Dropbox and Box.net. In other words, the competition is fierce, but cloud computing is also fiercely popular – enough to support a wide range of contenders, for now at least.That could all be changing. Hedge fund favorite Google (GOOG) is launching an online storage service to rival the largest of the cloud computing services. The new service is called “Drive” and it is expected to launch in a few weeks. Like its rivals, Drive will let users store documents, photos and videos on Google’s servers so that they are accessible anytime the user has an Internet connection. Also, like its rivals, Google Drive will provide a small amount of storage for free, charging a fee only to those consumers and businesses that want to store a large amount of files. People close to the matter say that Google plans to charge far less for its cloud computing service than its competitors.
“Google previously contemplated a cloud-storage service. Five years ago, Google co-founder Larry Page, who is now the company’s chief executive, worked with teams of programmers to develop a service, known internally as ‘G Drive,’ to let people store music files and other data online, according to people familiar with the matter. It was set to launch in late 2007 but never did,” reports the Wall Street Journal. “Since then, Dropbox, founded in 2007 by two graduates of the Massachusetts Institute of Technology, has skyrocketed in popularity. As of October 2011, Dropbox had more than 45 million members who saved one billion files every few days.”
Google’s Drive is its latest effort to compete against the myriad companies that are popping up with new, competitive technologies. “Last year, the company released Google+, which aims to compete with social-media sites Facebook Inc. and Twitter Inc. Google Currents, a mobile-device app that lets people read news articles, was launched last fall and is viewed as a competitor to Flipboard Inc. and other such apps. Google also has developed services and bought business-reviews company Zagat to better compete with Yelp Inc.” Granted, Google has also had some flops, like Google Wave, a soon to be defunct communication and collaboration tool, and Google Buzz, a defunct micro-blogging and messaging tool, but we think cloud computing will be different.
The market is there, and still new enough to jump in. “World-wide, $830 million was spent on such file and back-up storage services in 2011, and that figure is expected to grow by 47% to $1.2 billion this year.” Plus, Google will have a unique edge if it follows through with plans to make cloud computing part of its wildly popular Google Apps, a suite of online software it provides businesses. Google can also benefit from economies of scale, giving it an additional advantage. Whereas competitor Dropbox is able to store up to 100 gigabytes per user (for a fee, of course), it is only to do so by piggybacking on another company’s infrastructure. “Dropbox is able to store so much data thanks to Amazon Inc.’s Web Services, a division that maintains a network of computers that stores data online. Amazon rents out this network to Web companies such as Dropbox, video site Netflix Inc. and social game company Zynga Inc.,” writes the Wall Street Journal. “Google already has a massive cloud infrastructure to store and power all of its services, from Web search and video site YouTube to Web applications such as Google Docs, which lets people create and work on documents and other files online.”
We think that Google is a great buy right now – and, with its Drive service on the horizon, we think that Google is going to pop. As of the end of trading on February 9, Google was priced at $611.46, or just 12.29 times its forward earnings, with a one-year target estimate of $702.03 a share – and the company could easily surpass that. It has strong earnings growth, growing 23.93% per annum over the last five years. Analysts estimate Google’s growth will continue at a rate of 18.39% per annum over the next five years, beating out expectations for its sector of 18.02% per annum. Google also has a strong nod from the hedge fund community. Stephen Mandel’s Lone Pine Capital had roughly $483.31 million in the company at the end of the third quarter. Ken Fisher’s Fisher Asset Management was also bullish on the stock. The fund had a position in Google worth roughly $362.60 million at the end of September.
Posted on 30. Jan, 2012 by Insider Monkey.
Guest post by: Insider Monkey
We have been urging investors to focus on high dividend stocks for the past year. The problem is, most people don’t know how to time the market. Dividend-yielding stocks are valued like any other stocks, and, like other investments, when they are undervalued is the best time to buy. We used price-to-book and price-to-earnings ratios to pick the most undervalued stocks.
Here is a list of high-dividend yielding stocks (at least 7% dividend yield) that have P/B ratios less than 1.2 and forward P/E ratios of 10 or less. Most of these stocks are foreign stocks which shouldn’t be very surprising. We think the crisis in Europe is overblown and both European banks and telecom stocks are undervalued right now. We know that most dividend investors are conservative investors but we believe this is a great time to at least initiate a small diversified position in the European stocks that nobody wants to own.
1. France Telecom (FTE) is a mobile operator which provides internet access and telecommunications services in Europe. The company has a market cap of nearly $40 billion. The stock offers a dividend yield of 13%. It’s currently trading with a forward P/E of 8.35 and a P/B ratio of 1.1. FTE lost 17% last year. France Telecom isn’t a popular stock among the 350+ hedge funds we are tracking. The only hedge fund with a position in FTE was Two Sigma Advisors.
2. Annaly Capital Management, Inc. (NLY) manages a range of real estate related investments. The company has a market cap of $16 billion, a dividend yield of 13.8%, a forward P/E of 7.22, and a P/B of 1.01. NLY returned in line with the market during 2011, returning 2.5%. Many hedge funds were buying NLY last year. Bill Miller’s Legg Mason Capital Management had more than 7 million shares of NLY during Q3. Some famous hedge fund managers also invested in NLY include D. E. Shaw and Cliff Asness.
3. Banco Santander, S.A. (STD) offers a range of financial products to European countries, Latin American countries and the United States. It has a market cap of $66 billion and a dividend yield of 11.12%. It trades with a forward P/E of 4.83 and a P/B of 0.63. The stock lost 23% in 2011. Ken Fisher was a huge fan of STD last year; he had nearly 29 million shares of STD at the end of September. Jim Simons and Bruce Berkowitz picked STD during the third quarter, each initiating a new position.
4. Telefonica, S.A. (TEF) is a $79 billion market cap company that provides telecom services in Spain, the rest of Europe and Latin America. It offers a 7.67 forward PE ratio, a P/B ratio of 1.13, and a dividend yield of 12.22%. The stock lost 17% last year. Jim Simons’ Renaissance Technologies is a fan of TEF. The fund had over $46 million in the company at the end of September after increasing its position by 373% in the third quarter.
5. Telecom Italia S.P.A. (TI): Telecom Italia S.P.A. is a company based in Italy that operates in the telecommunications sector. It lost 12% in 2011. The stock has a market cap of $18.3B, offers a dividend yield of nearly 8%, is priced at a forward P/E of 6.33, and has a P/B ratio of 0.62. Jim Simons was a fan of TI last year. Steven Cohen and Israel Englander also had very small positions in Telecom Italia.
6. VimpelCom Ltd. (VIP) VimpelCom is a group of integrated telecommunications services operators. VIP has a dividend yield of 7.68%. It also has a forward P/E ratio of 7.74 and a P/B ratio of 1.09. It has a market cap of $13.4 billion and lost 33% during the past year. D. E. Shaw had 1.37 million shares of VIP in his portfolio, according to Q3 filings. Louis Bacon Moore sold his fund’s $13 million position during the third quarter.
Posted on 08. Jun, 2011 by Insider Monkey.Insider Monkey
Warren Buffett is one of the best investors of the past 60 years- probably the best (I haven’t made up my mind whether Jim Simons, who started investing at a late age, is better than he is). His track record for the first 50 years of his investment career is absolutely amazing. Unfortunately, for the past 5-10 years his alpha went down to zero from around 10-12 percent per year. We calculated Warren Buffett’s alpha for 5 and 10 year rolling periods using Carhart’s four factor model. Carhart’s model tries to dissect returns into four compartments: market return, size effect, value effect, and momentum effect. Whatever isn’t accounted for by these four factors shows Warren Buffett’s alpha. Carhart’s model correctly shows alphas of nearly 20% per year in the late 70′s and early 80′s, and 10+% in the 90′s. However, Warren Buffett’s alpha started to decline below 10% in the mid-90′s and pretty much went down to zero for the past 5-10 years. Read the rest of this entry »
Posted on 05. Jun, 2011 by Insider Monkey.
Posted on 05. Jun, 2011 by Insider Monkey.
Nelson Obus and Wynnefield Capital’s Latest Insider FilingBy Insider Monkey
We were about to report Nelson Obus and Joshua Landes’ most recent insider purchases and saw a Dealbook article detailing Nelson Obus’ illegal insider trading investigation and trial which he won. He spent $6 Million to defend himself against SEC’s weak charges and still tries to clear his name. Illegal insider trading isn’t easy to prove and the SEC couldn’t meet the burden. Nelson Obus also didn’t settle the case with the SEC. He could have done this without admitting or denying any wrongdoing. This tells us that he is really innocent.
Nelson Obus started Wynnefield Partners with Joshua Landes in 1992. Before that Obus worked at Lazard Freres & Co. for eight years. He has a B.A. degree from NYU and an M.A. and A.B.D. from Brandeis in Politics. Joshua Landes also worked at Lazard Freres between 1984 and 1991. He has a B.A. degree from Rutgers in Economics. Wynnefield has $280 Million in AUM. Here is how they describe their investment strategy:
“Wynnefield Capital, Inc. (WCI) is a value investor, specializing in U.S. small cap situations that have a company or industry specific catalyst(s). Surfacing of these catalysts unlocks existing, but previously unrecognized value for shareholders. WCI maintains an active investment philosophy. We are not involved in “Greenmail” situations, but focus on initiatives with management and outside directors to release value.
We seek out under-followed, unrecognized and undervalued companies that fit our parameters which include minimal balance sheet risk and potential for micro or macro change. WCI adds value by uncovering both long and short opportunities through in-depth original research. We are patient tax conscious investors and generally maintain portfolio positions for 24-36 months.”
Last Wednesday Wynnefield field a Form 4 with the SEC disclosing that they purchased 134 K shares of MAM Software Group at $1.75 per share. MAM Software has a market cap of only $20 Million, so it is clear that Wynnefield invests in under-followed and unrecognized companies. You need to decide yourself whether MAM Software is an undervalued stock with minimal balance sheet risk and has potential catalysts.
Note to Sax Angle readers, this is not a postion of the firm.