Super Stock Blog

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Month: February 2010

Charlie Munger and the Death of Capitalism

Just like his cohort Warren Buffett, Charlie Munger has stories to tell himself.  There’s been a lot of discussion of the one he recently posted about the ‘Death of American Capitalism.’  To sum it up, he states that America’s time is over.  The global economy will grow and we will finally have to take a step on the sidelines.  He also states that it’s all downhill from here.  He says the ‘financial derivatives of mass destruction’ will continue to spoil ‘Wall Street’ to gamble their money in ‘bucket shops like the 1920s’.  This will have a mass effect giving ‘25% of our GDP’ to the casinos and a profit of 22% to the casinos.

Charlie and Warren Buffett are the biggest capitalist and most powerful ones running the US engine.  They would both like to continue this engine moving forward, but Charlie’s article is made towards gaining an audience and giving a conclusion to a path that we can still solve.  The government might have to step in and prevent some of this ‘free market’ like these derivatives from occurring in the future.  There are already steps in place like separating banks from being brokerages.

His article is mostly to tell a future that he does not want to see but it possibly might happen.  We can do everything to stop it, but there will be gambling.  We will be heading towards a lower status in the global market.  Other countries will finally have their time to prosper.  However, if we can keep pulling through engineers, we can continue to have our time.  We’ve had economic problems every decade.  We’ve always found a way to break through with innovation and creativity.  We just need that magic system again.  It won’t come through manufacturing like it has in the past.  It will be through green energy, advanced technology, something the world needs and something only Americans would think of.

Here’s the article with his story:
and Marketplace’s interpretation

Video Games Will Prosper Once Again

Activision (ATVI) and Electronic Arts (ERTS) will regain their strength once again.  Once said to be recession proof stocks, they have rapidly dropped to 5-year lows and they have continued to get bad press for missing out on analysts estimates.  They still make a profit quarterly and will continue to make cash flow in the years ahead.  2010 looks to be a good year for their video games line-up.  I’m in it for the long-term and I will be patient to sell.

Activision is the best prospect to play the long-term.  After last week’s earnings release, their stock popped up 10%.  It went from $10 to $11 and many investors sold their gains.  I’m holding on.  They just released Starcraft II on beta and they expect a release in the summer time.  If anything, this is probably the best time to get in.  Starcraft I sold over 4 million copies in Korea alone.  It’s a game played globally for it’s great single-player and multi-player action.  They even have television channels made exclusively for the game.

Activision is also planning on releasing a few more big hits later this year such as another Call of Duty game.  The fan base for this first-person shooter will definitely be buying again for 2010 after seeing the showing for Modern Warfare 2.  Spider-Man and James Bond are going to have another video game release also.  There will also be a few Guitar Hero releases.

Have you heard of World of Warcraft? (NTES), World of Warcraft’s china provider for MMOG, has been allowed to put their expansion Burning Crusade out to the public.  Last year, the government stopped WOW subscriptions since they needed better regulation.  This pretty much means the government wants a way to control a foreign commodity that has tons of potential in their market.  This had an immediate drop in the Activision price.  With the announcement of WOW subscriptions being allowed again, you can bet the profits will pick up for Activision.  Most people have not heard any news about this, but you will definitely see it with the earnings.

Electronic Arts (ERTS) has been on a bad streak for the past year.  They have lost profits and have given gloomy reports for the next quarters.  I think they are releasing estimates that are at the ‘worse-case’ scenarios.  This is especially since their line-up has been doing quite well recently.  Their Battlefield Bad Company II just broke the record for the most downloaded demos.  It has over 3.5 million downloads.  This will definitely be another big hit such as Activision’s Modern Warfare II.  They already have a hit with the release of Mass Effect 2.  It has glowing reviews and everyone who’s played it is hooked.  It hit second on the most sales for the January video game charts.

Another couple things to look forward to is Tiger Woods return back to golf and FIFA Online.  Tigers Woods should help get their golf game back to action.  I’m not too sure how they will monetize online soccer but I’m sure they have sponsors that will back this game and I doubt their are that many fees to hosting these servers if it does not follow through with success.

I think the worse case scenarios have already been priced in these two stocks and look to make some big cash with each.

Western Union – Global Growth Stock

Western Union, WU, has recently hit bottom lows reaching as far as the march 2009 lows.  There’s no particular reason for this stock to have gone this far low.  Of course, it had it’s rough patches but being part of the financial industry it was sold off as the other bank securities and other financial stocks were dropped off the radar.  This particular stock continues to show growth, quarter over quarter and year over year.

Look at the quarters for the past three years:

Just look at the 10-year:

It continues to impress with better EPS and net income even as the stock market continued to rise the past 2009.  So how do you trade this stock?  It’s a short-term and long-term trade.  Both are worth getting into now.

This is a global business.  They trade money all around the world.  You go to any country and you can bet they have a Western Union in that city or town.  The name is well recognized.  Just by looking at the financial results, it shows their business have thrived throughout the downturn.  They will have competitors, but just like Coca-Cola, other companies cannot compete against the top branded business.

People love money.  They love transferring money.  People need money in depressionary and inflationary times.

Stock Market Reaches a Bottom

With the SPY sitting at 108, we have reached weekly and daily lows on the stock market.  Last friday we hit the bottom at 105 meeting the same low of November 2009.  It appears that the bottom has already been matched and it’s time to continue the rally furthur up.  The market appears to have a good chance of moving up monday with good news from the Japanese stock market.  Their GDP has increased 4.5%.  This is a much improved increased from what forecasters thought it would be.

As we have already been on an upward trend for the past year, I highly doubt we will have the continued strength from the past.  Look for continued consolidation as the economy continues to improve but bounce back-and-forth with multiple job loss forecasts.  I will post up some good stock trades later this week.

Stock Market Still Dropping

The stock market has been dropping for the past week.  Gold stocks have taken quite a hit.  We are starting to see real bargains in the precious metals.  Stocks like PAL and CDE are reaching lows not seen since 2009.  I think the technicals say there is still much chance for the stocks to drop more.  The stoichastics show the weekly and daily are at lows, but we have been rising for quite some time.

For those that like to play it safe, it might be a good time to get in some conservative long-term holds.  Pfizer, PFE, and AT&T, T, offer nice dividends for those that do not need money right away and are willing to wait for the stock market and the economy to improve.  I would not be in the boat to be shorting stocks right now unless you’ve known of stocks that have risen too high as of late.

Looking at the SPY, we’ve only hit the monthly low of the stoichastics about once every two years.  It looks like the SPY might drop down to the 102 or 103, but from there on, it should be time to start buying and looking into long-term stock plays.  The market will improve.  The government has put too much cash in it for it to drop to march 2009 lows.

MetroPCS at Bargain Prices

MetroPCS has reached decade low prices.  It already reached the March 2009 lows being at $5 currently.  If you take a look at its earnings, they have continued to bring in profit quarter after quarter.  The Super Bowl ad shows it’s pricing power – for $40 you get unlimited phone minutes, text, and web access.  AT&T is the only closest competitor at $70.  We’re at a recession right now and it’s surprising to see their stock price keep dropping even though they keep bringing in more subscribers.

Investors are selling because they believe Verizon and AT&T have the edge with the biggest network.  However, I seriously doubt they would drop their prices to MetroPCS’s prices.  Their profit margin would be seriously cut if they did.  MetroPCS has a big niche.  It markets to urban cities and it markets a very competitive price and it remains profitable.  I think the current price of $5.88 is a bargain.  There’s a lot more reward vs risk in this stock.

Electronic Arts Outlook Looking Better

Electronic Arts (ERTS) has had a terrible winter quarter.  They had massive layoffs, miserable sales during the holidays, and lowered guidance in January.  Their stock has been punished.  It’s almost at $16 which is very near its all-time 5-year lows which was hit previously in March 2009.  However, I tend to look at the long-term case especially the risk vs rewards.  The last time stocks reached these levels were in the year 2000.

Let’s take a look at it’s financials.  They have had annual losses for 2009 and 2009.  Could they be finally getting out of their cold?  The economy is picking up, but consumers are still not buying.  If you’re unemployed, I’d bet you’d still have $60 to buy a game.  Anyways, long-term wise their financials do not look that good.   They have negative cash flow and net losses for the year.  However their game lineup is strong this year.

Games influence the price.  If Electronic Arts can get a ‘Modern Warfare 2’ effect, they will be able to hit profits again.  You’ve also seen it with Rockstar Games with Grand Theft Auto.  They just released Mass Effect 2 last week.  It has already sold over 2 million copies.  Especially with their lower guidance it makes their stock much average to what it should be priced out.  We’re looking for the future though.  If the games are good, the stock price will move with it.

In 2009, we saw a pretty mediocre lineup: Madden NFL, Battlefield, Fight Night, Dead Space, Tiger Woods Gold, Godfather Part 2, My Sim Party, Nascar Kart Racing, Skate 2, Lord of the Rings, and Mirror’s Edge.  These games did mildly well, some did bad, but none of them were blockbusters.  Here’s what is coming out in March 2010: Command & Conquer 4 (PC), Battlefield: Bad Company 2 (PC, PS3, XBOX).  These are two very strong games.  I’d say for the short-term 6 months there’s money to be made with ERTS.

I’ll be taking a further look into ERTS in the future.  If the market continues dropping, it might be better to wait it out before buying.  The stoichastics have already hit the lows for the daily and weekly.  The RSI(2) is weak also.  There could be continued downside for this stock as the video game industry continues to drop, but the long-term perspective continues to get better.