What stocks do you own and why?

[muzie_IHB]

*You provided solid foundamentals for each of your current positions and I agree with most of them. But keep in mind foundamentals are almost useless in today's market, foundamentals tell you WHY to buy, but it never tells you WHEN to buy.

Huh? Sorry I had to laugh a bit at that one. So one-sentence blurbs nowadays is what we call "solid" fundamentals? Nothing wrong with the companies, but you know, doesn't look like it took more than five minutes to come up with each of these solid fundamentals... Where's the edge?

Any actual old fashioned investors still left? By investor I mean people relying on actual cash flow from the company to provide the gains, not on what the mythical "big boys" may or may not think about stocks next month. WHEN to buy? When the cash flow from the investment will recover the equity in a reasonable amount of time, that's when. Not that hard, unless you're going swinging for the fences every time.

As for ATVI. Funny that you mention that. It's my top pick. Always interesting to exchange thoughts, so feel free to PM, though I must say I'm more interested on thoughts about cash flow numbers than release hype .

 

[BondTrader_IHB]

*You provided solid foundamentals for each of your current positions and I agree with most of them. But keep in mind foundamentals are almost useless in today's market, foundamentals tell you WHY to buy, but it never tells you WHEN to buy.

Huh? Sorry I had to laugh a bit at that one. So one-sentence blurbs nowadays is what we call "solid" fundamentals? Nothing wrong with the companies, but you know, doesn't look like it took more than five minutes to come up with each of these solid fundamentals... Where's the edge?

Any actual old fashioned investors still left? By investor I mean people relying on actual cash flow from the company to provide the gains, not on what the mythical "big boys" may or may not think about stocks next month. WHEN to buy? When the cash flow from the investment will recover the equity in a reasonable amount of time, that's when. Not that hard, unless you're going swinging for the fences every time.

As for ATVI. Funny that you mention that. It's my top pick. Always interesting to exchange thoughts, so feel free to PM, though I must say I'm more interested on thoughts about cash flow numbers than release hype .

Man, I wish we could go back to the old days when one can actually rely on foundamentals to invest instead of having to follow the big/fast/pump&dump money

 

[acpme_IHB]

What makes ATVI stronger than its peers is WOW provides reoccurring monthly revenue. Similar to how EA basically has an annuity with its Madden and other sports games. Compare to TTWO, which was near BK less than 12-mos after releasing one of the best selling games ever. Game publishers live and die on a few occassional bestsellers because so much capital goes into development. As WOW subscriber base continues to grow, ATVI will be on solid footing even with a lack of bestsellers from their traditional game publishing business. So your point about cash flow is right on. However, gaming is a lot like the entertainment business in that release schedule is not just hype, but ultimately what drives sales.

in my opinion, things to consider about ATVI:

- WOW subscriptions don't continue to grow. the game engine is getting outdated and how long can they expect to hold the attention of a demographic that is not known for long attention spans. will they be able to replace this revenue and grow it overseas where WOW has far less popular? a SC-based MMO would be scary thought for ATVI's rivals in asia.

- Poor YoY sales in July overblown. unlike movies where studios line up their big releases at roughly the same time period each yr, gaming releases are more random. lower sales this summer compared with prior yr when an unusually large number of highly anticipated games were released within a short span makes the YoY look worse than it really was. i've seen this mentioned in commentary and analysis although the whole peer group is down significantly since july while the broad mkt was up 10% over the same period. makes me think the mkt has overbaked what looked like bad results for 2Q and not fully baked in what is expected to be a much stronger 3-4Q release slate than compared to 2008.

 

[Nude_IHB]

What makes ATVI stronger than its peers is WOW provides reoccurring monthly revenue. Similar to how EA basically has an annuity with its Madden and other sports games. Compare to TTWO, which was near BK less than 12-mos after releasing one of the best selling games ever. Game publishers live and die on a few occassional bestsellers because so much capital goes into development. As WOW subscriber base continues to grow, ATVI will be on solid footing even with a lack of bestsellers from their traditional game publishing business. So your point about cash flow is right on. However, gaming is a lot like the entertainment business in that release schedule is not just hype, but ultimately what drives sales.

in my opinion, things to consider about ATVI:

- WOW subscriptions don't continue to grow. the game engine is getting outdated and how long can they expect to hold the attention of a demographic that is not known for long attention spans. will they be able to replace this revenue and grow it overseas where WOW has far less popular? a SC-based MMO would be scary thought for ATVI's rivals in asia.

- Poor YoY sales in July overblown. unlike movies where studios line up their big releases at roughly the same time period each yr, gaming releases are more random. lower sales this summer compared with prior yr when an unusually large number of highly anticipated games were released within a short span makes the YoY look worse than it really was. i've seen this mentioned in commentary and analysis although the whole peer group is down significantly since july while the broad mkt was up 10% over the same period. makes me think the mkt has overbaked what looked like bad results for 2Q and not fully baked in what is expected to be a much stronger 3-4Q release slate than compared to 2008.

I'm going to quibble with your "Poor YoY sales in July overblown" sentiment. Summer is typically when video games get a surge due to kids being out of school. WoW in particular traditionally gets a bump during that time period, but there was remarkably less traffic on the servers this summer compared to last year or the year before. This next X-pac will probably be the last for the WoW universe, and it's hard to get a subscription for an internet game when parents can't afford the cable bill. I'm not saying ATVI has lost it's cash cow, but I don't see long-term growth for the franchise. Starcraft 2 might be a hit, but I don't see it having the same level of appeal as WoW did because it's an inherently different game. I think the YoY numbers portend another tough time for the industry outside of ATVI and a leaner time for Activision itself.

 

[acpme_IHB]

i get the recessionary spending argument although that doesn't necessarily jive with ATVI being down 8% since July when SPY and TWC are up 10% and 20% respectively over the same period. basically i agree with everything you said; i just don't agree it's been priced appropriately.

i also agree we should expect to see the slow death of WoW over the next yr or so, but i do believe the impact of sc2 is also generally underestimated, especially overseas. as popular as WoW is in north america, it's based on european-style fantasy genre which has never resonated overseas. the original starcraft on the other hand still has a huge following internationally.

they would be stupid not to convert the SC franchise into MMO or some other reoccurring revenue stream. remains to be seen if it'll happen.

 

[muzie_IHB]

Man, I wish we could go back to the old days when one can actually rely on foundamentals to invest instead of having to follow the big/fast/pump&dump money

No, those "old days" never went away. Actual productive assets (sorry gold, you're out) will always generate cash flow that in due time will benefit the investor. In the real world, a year is too short a time frame for most mature companies to realize any kind of significant endeavour, so I don't see why stocks should be any different. Just stretching to a two year horizon, you'll find a good amount of stocks that retained their value over this whole debacle.

Even if there were "pump & dump" schemes (which are unprovable myths that will always persists precisely because you could never either prove or disprove it on any particular stock), I doubt those pumpers would have multi-year time frames.

 

[acpme_IHB]

Man, I wish we could go back to the old days when one can actually rely on foundamentals to invest instead of having to follow the big/fast/pump&dump money

No, those "old days" never went away. Actual productive assets (sorry gold, you're out) will always generate cash flow that in due time will benefit the investor. In the real world, a year is too short a time frame for most mature companies to realize any kind of significant endeavour, so I don't see why stocks should be any different. Just stretching to a two year horizon, you'll find a good amount of stocks that retained their value over this whole debacle.

Even if there were "pump & dump" schemes (which are unprovable myths that will always persists precisely because you could never either prove or disprove it on any particular stock), I doubt those pumpers would have multi-year time frames.

]

Interesting to see these two viewpoints right here. As an investor it's wise to have such a long-term outlook. Unfortunately few investors have such wisdom, and as such, few managers and traders have the leeway/conviction to make the right long-term decisions.

"The market can stay irrational longer than you can stay solvent."

 

[BondTrader_IHB]

Man, I wish we could go back to the old days when one can actually rely on foundamentals to invest instead of having to follow the big/fast/pump&dump money

No, those "old days" never went away. Actual productive assets (sorry gold, you're out) will always generate cash flow that in due time will benefit the investor. In the real world, a year is too short a time frame for most mature companies to realize any kind of significant endeavour, so I don't see why stocks should be any different. Just stretching to a two year horizon, you'll find a good amount of stocks that retained their value over this whole debacle.

Even if there were "pump & dump" schemes (which are unprovable myths that will always persists precisely because you could never either prove or disprove it on any particular stock), I doubt those pumpers would have multi-year time frames.

I'm tired of arguing with anyone who still doesn't believe this market (including commodities) are manipulated by the big boys, and of course they have multi-year time frames, they created one big bubble after another and sucking small investors like you in it. You are right, 1 year is too short, how about I give you 10yrs, foundamental very strong companies like CSCO, YHOO, MSFT... if you simply INVEST/(buy and hold) for the last 10years, you didn't make a penny! The buy&hold days are gone, by no means I'm recommending anyone here day-trade, but you have to follow the trend and know what those big boys are doing, if you can't beat them, join them.

I had a Barclays guy asked me this morning what I think is the next bubble, I told him "they" are blowing up another one right now with this sucker stock market rally with no earnings.

 

[muzie_IHB]

the game engine is getting outdated and how long can they expect to hold the attention of a demographic that is not known for long attention spans. will they be able to replace this revenue and grow it overseas where WOW has far less popular? a SC-based MMO would be scary thought for ATVI's rivals in asia.

I highly doubt that engines getting outdated really has much of an impact on popularity here. This is not what the customer base is interested in. There's already a precedent for other ten-year old Blizzard games still being widely played regardless of obsolescence. If anything engine upgrades can to a degree hurt the customer base as they require them to do expensive upgrades.

WoW isn't a fad. It won't "die a slow death". There is substantial investments being made by Blizzard on content creation, gameplay innovations, customer service improvements. Those are huge obstacles to competitors. The average length of play is nine months as per the earnings reports. Eventually the game will run out of new players that wish to try out the game, but even as that happens I'm confident the core base of customers will settle at a number that will far outstrip any competitor.

They haven't announced a new customer base milestone in a while, so it seems likely it hasn't gone much past the 11.5 million from last year. I would not be surprised a new milestone be announced once the game goes online in China again however. Chinese revenu is a very small part of overall revenue though.

As for comments about "June sales been poor", I agree it's irrelevant. In fact I can't for the life of me understand why anybody cares about month-to-month sales. This company is selling products that take 5-7 years of R&D to reach fruition and be put to mark, with branded franchises that span a decade; it's not cans of soups with exact margins & orders per month. WoW does provide recurring revenue and some stability, but the lag between investment & return for these products is so long that I find the month-to-month comparisons completely useless.

It's also common for most Blizzard games to stay on the top ten PC charts for very long periods, a year or more, unlike other games which peak out on the charts for a couple months. Thus again, making comparisons of one month to the other rather trite.

 

[muzie_IHB]

I'm tired of arguing with anyone who still doesn't believe this market (including commodities) are manipulated by the big boys, and of course they have multi-year time frames, they created one big bubble after another and sucking small investors like you in it. You are right, 1 year is too short, how about I give you 10yrs, foundamental very strong companies like CSCO, YHOO, MSFT... if you simply INVEST/(buy and hold) for the last 10years, you didn't make a penny! The buy&hold days are gone, by no means I'm recommending anyone here day-trade, but you have to follow the trend and know what those big boys are doing, if you can't beat them, join them.

I had a Barclays guy asked me this morning what I think is the next bubble, I told him "they" are blowing up another one right now with this sucker stock market rally with no earnings.

Believe me I'm just as tired hearing about it everywhere than you arguing about it.

It may be true. It may be true the Fed secretly sells gold on the markets. It may be true some entities propped up this housing bubble to gather assets afterwards. It may true there were aliens in area 51. All of these things are unprovable either way.

I certainly believe there are instances of manipulation in specified smaller stocks, in limited time intervals. The argument is that most, or in fact close to all stock movements are manipulations by unknown parties, and that world indexes are moving in tandem due to the actions of a cabal of elite investors. That to me gets pretty close to tinfoil hat territory.

In short, yes there are manipulations, in some limited areas. The odds that your particular trade you made last week was successful or failed because you correctly guessed what an unknown cabal of investors wanted? Nil. As humans we like to give a reason for everything that happens. But with millions of participants in a market, of course there is no "one" reason for every single movement, the same way there is no "reason" for every single grain of sand to go some specific place in a sandstorm. Sometimes the wind will produce coordinated action, but most of the time there is no reason.

 

[BondTrader_IHB]

I'm tired of arguing with anyone who still doesn't believe this market (including commodities) are manipulated by the big boys, and of course they have multi-year time frames, they created one big bubble after another and sucking small investors like you in it. You are right, 1 year is too short, how about I give you 10yrs, foundamental very strong companies like CSCO, YHOO, MSFT... if you simply INVEST/(buy and hold) for the last 10years, you didn't make a penny! The buy&hold days are gone, by no means I'm recommending anyone here day-trade, but you have to follow the trend and know what those big boys are doing, if you can't beat them, join them.

I had a Barclays guy asked me this morning what I think is the next bubble, I told him "they" are blowing up another one right now with this sucker stock market rally with no earnings.

Believe me I'm just as tired hearing about it everywhere than you arguing about it.

It may be true. It may be true the Fed secretly sells gold on the markets. It may be true some entities propped up this housing bubble to gather assets afterwards. It may true there were aliens in area 51. All of these things are unprovable either way.

I certainly believe there are instances of manipulation in specified smaller stocks, in limited time intervals. The argument is that most, or in fact close to all stock movements are manipulations by unknown parties, and that world indexes are moving in tandem due to the actions of a cabal of elite investors. That to me gets pretty close to tinfoil hat territory.

In short, yes there are manipulations, in some limited areas. The odds that your particular trade you made last week was successful or failed because you correctly guessed what an unknown cabal of investors wanted? Nil. As humans we like to give a reason for everything that happens. But with millions of participants in a market, of course there is no "one" reason for every single movement, the same way there is no "reason" for every single grain of sand to go some specific place in a sandstorm. Sometimes the wind will produce coordinated action, but most of the time there is no reason.

I'm talking to those bankers on daily basis and I'm seeing what "they" are doing everyday to this market, I don't need any more proof. But "They" need more people like you who still believe the system works just fine, good luck. I'm done with this thread.

 

[acpme_IHB]

the summer sales numbers reported by most media outlets referred to YoY performance but i agree with you about the development cycles.

as for WoW, no it won't die out anytime soon. dominant doesn't describe their position in MMO.

MMO subscriptions (only through 2008)

while i agree with you, here's some devils advocate food for thought...

i pop into the pc center next to the 24 hr fitness at uci and notice people are predominantly on WoW, with a surprising amount of "vintage" gaming like SC and counterstrike. vintage games, however outdated, are free.

i visit asia few times a yr and don't seem to recognize the games year after year. looking at subscription numbers of online gaming in asia appears to confirm that popularity of games is less sticky. thinking about MMO in asia is interesting. on the one hand, you have a massive market of gaming fanatics. in korea, SC is nearly treated like a professional sport and you see stories of kids glued to their keyboards and mice until they literally die of starvation. on the other hand, it's a place where people are not used to paying for gaming. they're hardly used to paying for legitimate software, let alone monthly subscriptions.

i don't like to presume anything when it comes to this industry. there was a time when nintendo was so all powerful that they could dictate to retailers how their products would be displayed, including walmart. they were the only company that told walmart what they could and would do. a decade later it looked like nintendo would be out of the hardware business for good and sony was untouchable. things have quickly changed again. WoW will get old at some point, but like you, i think blizzard is in the best position to fill that void when the time comes. none of the other publishers have anything, whether in development or even on the drawing board, close to matching the broad appeal and potential longevity as blizzard's franchises.

 

[Nude_IHB]

WoW isn't a fad. It won't "die a slow death". There is substantial investments being made by Blizzard on content creation, gameplay innovations, customer service improvements. Those are huge obstacles to competitors. The average length of play is nine months as per the earnings reports. Eventually the game will run out of new players that wish to try out the game, but even as that happens I'm confident the core base of customers will settle at a number that will far outstrip any competitor.

...

It's also common for most Blizzard games to stay on the top ten PC charts for very long periods, a year or more, unlike other games which peak out on the charts for a couple months. Thus again, making comparisons of one month to the other rather trite.

WoW isn't a fad, but it is suffering. Recent announcements of new features and yet another content expansion aren't being driven by a desire to flesh out a growing franchise but by the need to attract old customers back into the game. And unless Blizzard can manage to make SC2 as wildly popular an MMO, they will be essentially a one trick pony. Compare to XBox Live Gold, which provide many more games for half of the monthly subscription fee. I'm not dissing Blizzard, I still play Diablo2 from time to time, but I'm not paying for battle.net or a WoW subscription when the only new thing in the game is the scenery.

On top of that, video gaming is the perfect example of a discretionary expense that will be the first to get cut in hard times. The higher the unemployment levels rise, the more belt tightening occurs, the lower their subscription base falls. In that scenario, games with great playability and no recurring charges win out over subscription-based games.

I'm not calling for the collapse of Activision's share price, but it wouldn't surprise me either. The fundamentals aren't the same as they were in 2005-07 and Blizzard was clearly bought at the top of the market.

 

[acpme_IHB]

As a general side note regarding this thread: If your preference is cash or some other defensive non-equity position, that's sort of a different argument. When people start a conversation about "What stocks do you like?", it always seems to turn into a debate about asset allocation as opposed to about stock selection. Just to clarify so we're not talking apples to oranges, I'm taking the original question literally.

Interestingly enough, I happen to agree with BondTrader that the mkt is overbought and smells incredibly fishy (just look at the volume), Nude that discretionary spending is going to hurt ATVI and they're facing heavy headwinds, and with Muzie that ATVI is a good stock. They're not completely independent.

 

[BondTrader_IHB]

As a general side note regarding this thread: If your preference is cash or some other defensive non-equity position, that's sort of a different argument. When people start a conversation about "What stocks do you like?", it always seems to turn into a debate about asset allocation as opposed to about stock selection. Just to clarify so we're not talking apples to oranges, I'm taking the original question literally.

Interestingly enough, I happen to agree with BondTrader that the mkt is overbought and smells incredibly fishy (just look at the volume), Nude that discretionary spending is going to hurt ATVI and they're facing heavy headwinds, and with Muzie that ATVI is a good stock. They're not completely independent.

Just did some quick analysis on ATVI. Following are my findings,

Technical

1. Institutions have been taking money out of this stock since early July and even during the run up in Aug, big money are coming out of ATVI.

2. Institutions would buy/support the stock around $8.5-9

Foundamental

1. Profit Margins improving from 08-09 and has been stable the last 2 quarters

2. Free cash flow showed a big negative (-132mm) in Q2 2009, I'm too lazy to look into why its negative for the 1st time in 2 years, but if FCC continues to be negative for a couple more quarters, I will be worried.

Just my $0.02.

 

[acpme_IHB]

Share repurchases... originally part of a $1B program, increased at end of 2Q an additional $250mm. In 2Q they repurchased 19mm shares, prob around $10-11 per sh off the top of my head.

 

[muzie_IHB]

I'm talking to those bankers on daily basis and I'm seeing what "they" are doing everyday to this market, I don't need any more proof. But "They" need more people like you who still believe the system works just fine, good luck. I'm done with this thread.

So you're saying if ATVI (or any other stock) doubles their income tomorrow "they" will just push it down regardless? And since 90% of stock transactions are in fact coming from institutions, how do the "big boys" decide which big boy is going to lose this month? Or is it you know all the "right" big boys and they're all so good that they screw the "wrong" big boys every time? With most individual investors just doing an indexed strategy nowadays who don't even care what the indices do, if the big boys have nothing better to do than to screw with the small fry money from the 5% of people that remain, "they" do indeed need some help.

I'm sure you'll understand if I am skeptical that I have found a person intimately connected and working alongside the very top money managers of the world somewhere lurking on this internet forum. Especially when they state that "strong fundamentals" are found in one-sentence blurbs. I imagine if this very special cabbal that drives the entire world stock market exists they would co-mingle with a more select group of people than the peeps here looking for real estate prices to become more affordable...

As for your thoughts on ATVI... Let me just say one of the reasons I focused my portfolio in concentrated holdings a while ago was precisely so I could study and thoroughly know a few select stocks and tell the truth from the random bullshit. After years of closely observing it and verying all the stories and theories I saw I realized most of what the financial media, pundits and short term traders think about a business is indeed random bullshit... and this is no exception.

Just spend more than five minutes studying an investment and read the public SEC records to answer your questions about cash flow and improving margins. It's not rocket science.

I mean here we are on a forum chastising folks for taking inconsiderate financial risk when buying houses and now we're supposed to take some investment advice from a few observations read off from a 5-minute read of a chart everyone has access to.

 

[muzie_IHB]

WoW isn't a fad, but it is suffering. Recent announcements of new features and yet another content expansion aren't being driven by a desire to flesh out a growing franchise but by the need to attract old customers back into the game. And unless Blizzard can manage to make SC2 as wildly popular an MMO, they will be essentially a one trick pony. Compare to XBox Live Gold, which provide many more games for half of the monthly subscription fee. I'm not dissing Blizzard, I still play Diablo2 from time to time, but I'm not paying for battle.net or a WoW subscription when the only new thing in the game is the scenery.

I wouldn't mix your personal views on what you think of the games with investment outcome. I think that's a mistake. It's glaringly easy to see that "obvious" things like graphics are not up to par with other titles. Where is your source regarding WoW "suffering"? I don't have any data source indicating this myself - apart from WoW being offline in China, which has mroe to do with government meddling then lack of consumer interest.

What's not so obvious is that there's an enormous hurdle to go over for a competitor to achieve the same quality of service. Literally thousands of technical support people are employed by Blizzard, avalable to help with game issues of any kind. A large scale IT infrastructure has been setup to distribute this large scale user base and make the game accessible at all times.

The investments required to match this people & technical infrastructure completely dwarfs the 10-30M$ that would be required to do a thorough graphics update.

On top of that, video gaming is the perfect example of a discretionary expense that will be the first to get cut in hard times. The higher the unemployment levels rise, the more belt tightening occurs, the lower their subscription base falls. In that scenario, games with great playability and no recurring charges win out over subscription-based games.

I'm not calling for the collapse of Activision's share price, but it wouldn't surprise me either. The fundamentals aren't the same as they were in 2005-07 and Blizzard was clearly bought at the top of the market.

I think if that were the case that scenario would have materialized by now. A drastic exodus of customers would have shown up in the earnings - which have been exactly on target for the last year.

Blizzard wasn't bought at all, by the way. The parent company operated a merger of Activision and Blizzard, with both companies having similar market caps. Even today the stock stands a mere 8% below the merger tender offer price; nothing indicates that this offer was terribly inflated right now.

I have been following and owning Activison Blizzard for quite a while and the "death" of WoW has been clamored for for years at this point. I thought the same as well, but I've changed my views and now view it the same way as a pay-per-month service like NetFlix, or cable. There's a significant part of the user base for which the game is simply a basic utility service for entertainment, not a one-time purchase.

I'm going to wait and see on the discretionary spending issue. With Starcraft 2 6-7 years in the making, how many fans will say "screw it - this took years to finally get a sequal I've been wanting but I can't afford 50$ for this game?". There are many more stocks (such as Netflix, Amazon) that rely on discretionary spending that have been flying way more than Activison. The spending issue seems overstated; people didn't use HELOCs to buy videogames.

As I stated, the whole thing about hyping up one game or thinking some other game will fail are of somewhat secondary interest. 95% of games perform somewhere along to expectations, so straying from that is just taking long shots at speculation. At this moment, the next Modern Warfare is the most pre-ordered game in stores so the whole idea that some cataclysmic event will nullify all that is really stretching it.

As I said, I'm more interested in numbers and valuations. The games will perform as expected. The question is calculating accurate margins and accurately assessing all sources of income.

 

[esq4_IHB]

Blackstone. Disconcerting for analysts because of their lack of transparency. Not for me. Blackstone thrives in recessionary periods. Buying now, will sell in 3-5 years.

Just sold C, UYG and MF after all more than tripled in less than 6 months. Not a pro, but feel like market is overbought.

Shorting real estate. Summer euphoria is short-lived BS. Just bought some SRS, but it's kind of a sketchy ETF. Open to other ideas.