Social Media Bears Vindicated Through Naivety

First off, due to the fact that I am a man of sportsmanship, I would like to give the bears their moment of recognition.

Now that you fools have had your moment to gloat, lets look at the reality of the situation the facts. I have heard it now for over 2 days, the masses spitting on social media, treating it like the dirt on their shoes and at this point I am fed up. Not fed up with investors analysis, everyone is entitled to their opinion, I am fed up with the lackluster understanding of the innate details of the social media story.

Do you know what happened with JCP stock on Wednesday? A tweet moved the stock price nearly 10%. That’s right, a tweet manipulated the stock price of a publicly traded company. Now to say social media has no potential, has no place in the modern world, has no merit to any individuals, is to say that you are oblivious to the inner workings of the current world we live in. Possibly your reality differs from mine, I tend to live in the real world while many of those around me are out of touch with it, though in both settings, we check our twitter to get updates about the goings-on around us. Many of you are obviously shocked how a tweet can move a stock price, more likely you are infuriated about the situation, being that you cannot make sense of it. That is correct, your naivety forces you to misunderstand the magnitude of the simple tweet. Your naivety also makes you unable to grasp the potential of social media. So let your naivety do your stock picking, while I sit here knowing that the influence of Nina Garcia will get many talking and shopping about That one tweet reached millions and that in turn will drive traffic into the store, if not at least raise interest of many about JCP new line of products.

Again, I believe that many don’t understand the grandeur of social media in all its forms. Social media allows the people of the world to connect with each other. Facebook for younger generation can be compared to the rotary phone of the past generations. That example was a simple to ensure you got the overall theme, obviously social media has a greater impact than the rotary phone and continues to change the way in which we interact with each other. Investors fail to grasp the earnings potential of social media time and time again. When it comes to browsing the internet, an individual may spend a few minutes on a website, reading an article, or scrolling through a sites info. If you put that same individual on a site dedicated to social media, like Facebook or Twitter, they spend much more time on the site throughout the day, because that information is routinely updated and new information added every moment. This difference in behavior of the individual I am referencing makes the revenue and profit potential of social media unprecedented. Let me put it in number terms, so that you investors understand it better. Facebook comes in first when discussing time spent on a webpage, Google sites including YouTube come in second. Do you know how many times your page changes when you check your email or watch a YouTube video? The ads change minimally, while in the Facebook setting the interface is designed for you to view many pages in a short matter of minutes. Social media lends itself to push ads in your face again and again, ads targeted to your spending habits or interest. This version of advertisement can be described as nothing more than a revolution.

I find solace in the bears analysis, many suggesting that the they knew all along, nice thoughts. Luckily for us bullish on the sector, time remains on our side. As the numbers out of many of the social media companies suggest, growth is still in play. Look at the mobile space for example, Facebook had a %67 jump in mobile access, with 543 million people accessing their platform via a phone. Zynga had both an MAU and DAU increase. Mobile was also a big avenue for Zynga as well with 33 million DAU. You can attempt to cut down the above companies statistics, but that is undoubtedly a lot of people. Mobile is unquestionably on the move and a territory where no precedents are set. Did anyone think that Facebook could manipulate their free products profiteering from the masses  in the matter of one-quarter? Facebook has proven itself a leader in its industry, but impossible expectations are just that, impossible. Zynga, still the social gaming giants still firmly rests its laurels on social gaming, but sees the real growth over all platforms (in particular mobile). All these numbers and stats merely suggest that the growth exist, users are still using, the making money without destroying your user base still remains challenging. But look, just sponsored stories in the news feed made a million dollars a day, and that my good sir is just the tip of the iceberg.

The growth sits there, slapping you in the face. The revenues are growing just like I wanted, just like you wanted, but obviously not up to Wall Street standards. Why does Wall Street have these ridiculous standards? Simple, investors still don’t understand the business and think it’s merely a fad, so for them to believe in these new tech companies they need to have Enron earnings. So I will sit here believing in the story, knowing that these are the companies are the future, that they have been true to their investors, that the manipulations that many are implying are something of the past. Yes many of the CEO’s and early investors have sold out, but most are still tied to the future of the company. Many of them see the potential, just look at the growth numbers. So no these leaders of the tech are not walking away, they are losing sleeping at night looking for ways to make money off mobile. Just as we stay up late analyzing their actions. No these companies are not crap, not ceasing to exist, though they are trading as so. Perception is everything and the perception still remains negative, but just because a company has a negative perception does not mean it is not a business. I can take off the blinders and see the future, see the story, see the growth, see where the profit will come from. So yes the bears have been vindicated, but the story is far from over.

I am usually right, but more often than not I am way too early to the race.

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Can RadioShack Save Best Buy?

We are currently witnessing the movement away from big box stores. This can be attributed to many factors, everything from the growth of Amazon and the Apple stores to the slowing of Television sales. How does this all play into the story of RadioShack and Best Buy, and why are these names even to be spoken of in the same article?  The answer comes simply and surprisingly; large sized big box stores are dying and Radioshack’s small square footage and large footprint could be just the right pump of adrenaline for Best Buy.

You have heard and read about the way in which electronic stores are utterly useless, that no one shops in them. Buying electronics in stores has declined for quite some time now and been replaced by an increase in the buying of electronics online. Many assume that the  previously stated items are the only factors in the lackluster performance of electronic stores, if that was the case than Apple would have never opened its retail stores. Americans like playing with merchandise before they purchase. Yes a movement has occurred towards purchasing online, but the need to see the merchandise in the store still exists. Apple stores have boded well for the company overall and for similar reasons (need to see and feels products) you will find a packed Best Buy on Saturday. Ask any generation or any personality type, before a major purchase, one must have a one on one experience with the product. Many bears will argue that Best Buy is merely a showroom for Amazon, that argument holds merit, but through a strong strategy, huge footprint (with the help of Radioshack), and quality products, Best Buy can continue to be a profitable electronic store giant.

In a faltering business the best move may be consolidation. It appears that their are many options when it comes to buying electronics, this is true to a certain extent. Though, when it comes to quality electronic stores there are just a few and Best Buy presents itself as a giant in the space. Consolidation may be key here, because one of issues that has repeatedly surfaced pertains to Best Buys square footage. These huge box stores have large cost associated with them. Consumers electronics, computing, and mobile phones are the largest aspects of the Best Buy operation totaling almost 3/4 of revenue. The 3/4 of their revenue obviously does not take up 3/4 of their square footage. Through consolidation Best Buy could push their premium, large margin products in a smaller square footage store. With such a large portion of their revenues in such a specified aspect of their company, their large stores are just not doing them justice. Looking back at Circuit City, one can recall that the death of this electronics giant was due to square footage as well, making the Best Buy argument for smaller square footage very real. An acquisition of RadioShack could be just the move to smaller square footage that Best Buy needs.

Einhorn recently mentioned exiting his position in the electronics giant, citing the company for not having a solid strategy going forward. To compete with the online giants Best Buy will undoubtedly have to rethink its game plan, or it will fall by the wayside like Circuit City. The RadioShack footprint encompasses over 7300 stores and unlike Best Buy, RadioShack sits in many malls and smaller shopping centers. The RadioShack footprint is undoubtedly worth its weight in gold. The strategy should slap these execs in the face, take their giant status to that of a god. If Best Buy can go from being a mere big box store to a conglomerate of big and small box stores the opportunities are boundless. Radioshack has the ability to be in any small town or any neighborhood, an ability that Best Buy does not and will never be able to have. Taking the abilities of RadioShack and adding it to the arsenal of Best Buy could revolutionize Best Buy’s strategy and save their dying industry. The smaller stores could suggest margin compression, but when it comes to small stores closer to home, customers have and always will pay for convenience.

The only way that RadioShack will have the best products is through Best Buy. The only way RadioShack will surive will be to have the best products. The only way that Best Buy will compete with the likes of Amazon is to try an approach besides big box stores. The possibilities are endless with a change in strategy, because as I mentioned earlier, Americans are humans at heart and like to touch and feel merchandise prior to purchasing. If there was ever time for Best Buy to come in and buy out Radioshack for the bargain of a lifetime, that time would be now. RadioShack has lost over 80% of its value in the last year and hell, its cheap. Survival is key here when it comes to the fast paced age of the internet consumer and this may just be the edge that Best buy needs.

Last point that I want to drive home many often overlook, brand name. Best Buy has been synonymous for years with quality products and quality service. RadioShack has always been the cousin that no one wants to acknowledge. By re-branding these stores and making them part of the giant that is Best Buy, the traffice alone in these smaller stores will increase dramatically, just by mere Best Buy branding. The potential is there for Best Buy to make moves to smaller square footage easliy and cheaply. With increased competition from online retailers, if Best Buy wants to survive as a big box, it may just have to bring in the little box as part of the team.

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Old People Should Not Drive

Yesterday, I was enlightened by the talking heads on CNBC. Enlightened to their ignorance, I was flabbergasted by the naivete that many of them spew. They were speaking about the new Apple connector, as I listened my draw dropped. They had no idea what they were talking about. Ignorance stems from lacking an understanding of a topic, and when it comes to technology many of the news sources just fail to grasp it, and that is where I grind my ax. It seems more often than not, the more senior group of investors write articles or jabber on the telly about topics that they have no in depth understanding about.  Then again that may be why many of these so called “brilliant” investors missed out on some of the stock movements of a lifetime and are rarely positioned for the next “big thing.”

I skimmed an article this morning referencing Zynga and Facebook. This articles suggested that Zynga was merely a company that sent annoying request on Facebook. This individual then continued to define his bullish stance obviously based on his lack of need for their products. I may be a health conscious fellow and avoid eating fast food, but I can still see the need of McDonald’s by many. An intelligent investor can look outside their arena of comfort to see why other companies fill the needs of many. Facebook allows individuals to connect, so the uniformed investing community believes that they are similar to Myspace or AT&T in the 90’s(remember the house phone, the thing that hung on your wall). To put it in terms that many of you will better understand: just because you don’t utilize Facebook, Yelp, Kayak, or Zynga does not mean that the company will not succeed.

Look back to the initial run up of Apple, many of the talking heads suggested that their was no need for any of the products they made. I even recall myself suggesting that a tablet was pure lunacy. Obviously I was wrong in my initial notions. I have since learned from my mistakes and forced myself to think outside the box. So yesterday as Apple announced that they change the adapter on their phone, the inital reation of the talking heads was one enveloped by negativity. Why would they do that? Why would they change things? Won’t this be bad for business? blah blah blah. The transition will in fact set up for ease of use down the road as they set up one cord for the next few generations of phones. Also by allowing for a new connector this will make the new class of iPhones more exclusive. As I have spoken previously, that has repeatedly been one of the issues with apple products, that they were once tiered to a select group and now a majority of individuals have them. Hopefully the new phone will separate the New iPhone users and iPhone 4 users by leaps and bounds, making new apple products exclusive. I digress, the future moves so quickly that many can’t keep up, let alone look down the pipeline to see what is coming. So as an informed investor think outside the box, because when it comes to technology, the older generation repeatedly lacks an in depth understanding.

Sometimes it is better to take the wheel and make grandpa play backseat driver.

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Sunday Funday: Dunkin Brands

Who doesn’t enjoy a fattening donuts on the weekend? Probably those of you who have a ridiculous diet and wake up to a juice shake. More power to those of you that take your health too seriously, me and the majority of Americans will continue to enjoy our sugary morning wake up call. Haven’t you heard, “American Runs on Dunkin’?” Though the previous statement is merely an advertising campaign, the truth reverberates throughout the catchy phrase. American prides itself on its addiction to caffeine, in turn the profits of many companies are contrived from an American enjoying a cup of joe and a breakfast pastry. Dunkin’ still is quite new to the trading block, but has served those who believed in the story well thus far. With its growth potential in the western United States, it will likely continue to do well for investors.

With huge growth opportunities, America seems to be running westward with Dunkin’. As a frequenter of these fine establishments, I see where the desire and growth both sit. The high P/E ratio lends itself to be a growth stock, which it obviously is. As I spoke of in a recent post, betting on the American coffee and breakfast market has proven itself successful in the past and will prove itself into the future. With a lower price point than other meals, Americans are more likely to spend on breakfast than lunch or dinner. As we see the economy faltering and Americans pinching pennies again, a breakfast treat will continue to be the choice of many as they pack a lunch and make dinner at home. Look at the success McDonald’s has had capturing the breakfast market and imagine the continued success a company like Dunkin’ can have, as it is symbolic of breakfast. As long as Dunkin’ performs like it did last quarter, this will continue to be a great company to be behind. Either way you cut this donut, looking at it from a growth perspective or brand recognition, Dunkin’ repeatedly keeps the masses coming back for the next vanilla creme filled donut.

What is Sunday Funday?

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The Death of the Phone Book

The other day I come home to a lovely surprise on my porch step. There sat two giant yellow books. For those of you who are youngsters, these items were phone books. Years ago, I would relish in throwing out the old phonebooks and replacing them with a newer version (I have a little obsession with kicking out the old and bringing in the new). That day took a different route. Instead of performing a switch, I sat them upon the kitchen counter to revisit them later. After literally no debate, I then proceeded to merely discard them.

Many of you reading are wondering why my exposition has any relevancy to the stock market. Don’t worry yourself, the intricate relationships will shortly surface, in turn making you a more informed investor.

Over the past five years we have seen the movement of communication migrate from home phones to handheld smartphone devices. Apple led the charge in the smartphone market, ensuring their dominance. What does Apple have to do with the death of the phone book you sit wondering? Let me explain it via an example, the other day my mother sent me a text message, asking for the phone number of one of my close friends. Being that I like many others despise speaking on the phone, I sent her his contact information via text. For those of you not handy with your smartphone (technologically illiterate), you can send a contact information via text message. With the press of two buttons, you can connect two people that were previously not connected. The above stated example represents just one instance of how we as a society have utilized new technology to eliminate the needs of old tools, such as phone books. Not only has Apple connected friends, but with the use of many different apps and search engines, Apple (and its following smartphone competition) has allowed our privileged population to connect to countless businesses with ease.

Let us take a peek at another tech giant and observe their influence on the death of the phone book. With a large portion of society utilizing social media, in particular, the younger generation, connectining using a phone book has become obsolete. Today when one loses a phone or finds the needs to add new contacts, the do so by creating a Facebook page for this need or sending a Facebook message to a needed contact. Even more recently, through Facebook’s smartphone application users can call each other with the ease of hitting the phone icon beside a friends name. More often than not one comes across an old friend through the platform and can find their number as easy as sending a message requesting their digits.The connectivity that this platform allows goes above and beyond anything that we as a society have previously seen. The above examples are just the beginning as many of you know. Facebook has hinted at creating their own phone,taking the level of connection to a new level.

The one company that has almost exclusively brought about the death of the phone book is a technology giant in many sectors- Google. With its search abilities Google has allowed the world to access information in a ridiculously timely fashion. I along with everyone else can find the local collision center in a matter of seconds. Google also allows for us to see what fellow customers fell about their experience prior to even making our initial phone call to a company. Today’s customers are more informed thanks to the death of the phone book. Not only that, but the customers as a unit are taking a different approach to where they spend their money. Particularly in these harsh economic conditions customers evaluate where they will spend their dollar wisely. That is why Google sided with Zagat late last year, to focus on expanding resources for the ever important and money conscious restaurant eating crowd. They have effectively allowed customers to get a wealth of information they previously could not find. If you want local chinese food, you no longer get an outdated menu in a phone book, you get a live menu on the computer with customer reviews. The death of the phone book has made customers lives easier and added new intermediaries to profit from the customer business relationship.

Companies and individuals undoubtedly benefit from the change in access to this information. These technology companies have changed the way we interact with the world, I not only look forward to what the future brings, but also how these techs profit from the change in the habits of the masses.

Hate it or love it, the tech giants are putting the last nail in the coffin of the phone book.

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