Wednesday, October 31, 2007

Garmin Should Be Bought On Weakness As The Tele Atlas News Is A Positive Event

Garmin (GRMN) reported EPS of 89 cents this morning beating already lofty expectations of 82 cents. The stock is selling off despite these results.

I can attribute this sell-off to one of three reasons. First, the old whisper number game is being played and despite GRMN reporting 78% growth in EPS was obviously not enough for the fast money crowd. Second, the stock was due for some profit taking.

The third reason is actually a reason to be buying the stock in here. GRMN announced concurrently with its earnings report the company’s intention to purchase Tele Atlas for EUR 2.3 billion or USD $3.3 billion which represents an approximate 15% premium to the bid made by rival TomTom for Tele Atlas. Recall that a few weeks ago Nokia (NOK) agreed to buy Tele Atlas’ digital mapping competitor Navteq (NVT) for $8.1 billion. The NOK/NVT deal would have left GRMN as the odd man out in terms of having a vertically integrated digital mapping source. GRMN was sold heavily on that news. Now that GRMN is in the game for Tele Atlas, the immediate reaction is to sell the acquirer. Since TomTom is not likely to go away quiet, investors may be concerned that GRMN would have to pay significantly more that $3.3 billion if a bidding war erupts. However, GRMN is far better positioned than TomTom to finance the acquisition and I think will be triumphant at the end of the day. TomTom shares are significantly lower in Europe as investors confirm that GRMN is now in the drivers’ seat for Tele Atlas.

In conclusion, the earnings plus the Tele Atlas news is a positive for GRMN and the stock should be bought on weakness, especially as it is down double digits in early trading today.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of GRMN --- although positions can change at any time.

Friday, October 26, 2007

Know Your Components of ETFs

I really enjoy David Letterman and am not much of a Jay Leno fan. Maybe it is an East Coast / West Coast thing. Or maybe it’s because I was a real Johnny Carson fan and Letterman is cut from Carson’s mold. One of my favorite bits on Letterman is “Know Your Cuts of Beef.” In than spirit I have my own version today – Know Your Components of ETFs.

This comes out of a conversation with an old friend who from time to time will closely follow my recommendations. He asked me yesterday where I thought Google (GOOG) was going. I said I have a target of $750- $850. This is based on both a top down and bottom up analysis which I performed with my research team. My friend said that he owned the Internet HOLDRs (HHH), an ETF comprised of internet stocks. To his surprise, I informed him that GOOG was not represented in the HHH. I explained that HHH was mostly comprised of Ebay (EBAY), (AMZN), Yahoo (YHOO) and Time Warner (TWX). HHH was introduced and launched many years before GOOG came to market and is a fixed portfolio. Since he thought he had GOOG exposure but had none; he wanted to keep exposure to EBAY and YHOO; and, wanted to cut back on exposure to TWX, AMZN and the other residual stocks in the HHH comprising about 15% of the portfolio he immediately sold some (but not all) of his HHH and used the proceeds to buy GOOG.

The lesson - Know Your Components of ETFs.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of GOOG --- although positions can change at any time.

Thursday, October 25, 2007

Facebook Will Not Save The Decline of the Microsoft Empire

Here are my thoughts on the Microsoft (MSFT) investment in Facebook. 20 years ago the company’s operating systems burst on the scene and helped to launch the desktop computing revolution. In the process it became a virtual monopoly. MSFT was the hunted and the rest of technology was the hunters. Now 20 years later, Google (GOOG) and Apple (AAPL) have emerged to be the leading edge of technology as MSFT is still trapped in its windows mindset. MSFT is now the hunter and no longer the hunted. The Zune is a joke. XBOX is an industry laggard. Any attempt to cut in on iPhone by MSFT will likely be a failure. The leadership at MSFT is rusty at best. Bill Gates is too focused on social issues and playing cards with Warren Buffett. The small investment in Facebook will not generate any meaningful benefit to MSFT. In the end, buying MSFT based on this news is a giant mistake.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of AAPL and GOOG --- although positions can change at any time.

Thursday, October 04, 2007

Disney And Its ABC Network Are The Big Winners In The New TV Season

So far, in my opinion, ABC (a division of Disney (DIS)) gets my vote for delivering the best new shows of the television season. We (my wife and yours truly) really enjoy watching Dirty Sexy Money and Big Shots. Both shows are quirky, avoid the formulaic model churned out by network TV, are not retreads and don’t have Law and Order or CSI in the title. The Disney Channel release of High School Musical 2 at the end of the summer was a formulaic hit which will generate secondary revenues for DIS in the months to come. ABC also premiered Cavemen this week which we unfortunately missed but plan to catch up on and watch in the future. Two new shows premiered this summer which I also highly recommend. The first one is also an ABC show, Greek. Our kids like to watch Greek with us, especially when I interject my experiences at Pi Kappa Alpha at the University of Pennsylvania. Greek appears on the cable ABC Family channel. The other summer entry is Damages which is on the FX (a NewsCorp/Fox (NWS)) cable channel. Damages is enthralling and is something I would expect on the big screen or HBO. The show has not yet ended its season run however there will be opportunities to catch the entire series at a later date when FX repeats the shows or it gets released on DVD. Speaking of HBO, the new season of Curb Your Enthusiasm is superb and for those of you desiring a more mature, sexually explicit and intellectual selection all in one, check out Tell Me You Love Me.

So does this translate into an investible idea? Perhaps. First, I would eliminate General Electric (GE) the parent of NBC and NBC Universal. Why did NBC lack patience with Studio 60 on the Sunset Strip? CBS is stuck in CSI mode and is still a company operated by and for Sumner Redstone. I would avoid CBS as well. DIS will bore you to death but it has delivered consistent positive returns to shareholders despite some of the boardroom drama the company loves to surface every few years. I would not exactly categorize DIS as a growth company but if I was looking to down shift some risk, DIS would be a top candidate. Finally, there is News Corp (NWS). I really like what Rupert Murdoch is doing with the Dow Jones (DJ) acquisition and how it fits in perfectly with his new concept, Fox Business Network (best of luck to my dear friend and colleague Cody Willard). NWS has a similar risk profile to that of DIS. In fact, if you overlay a 5 year chart of DIS over that of NWS, the two companies’ stocks nearly tracks each other. So, I would put NWS in the same category as DIS and would be indifferent to add either one if those conditions I discussed above were presented to me.