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Musings on Markets's Blog

Valeant: Information Vacuums, Management Credibility and Investment Value

April 20, 2016 Comments (0)

As an investor, would you buy shares in a company that is at the center of a political and legal firestorm? What if this company has a CEO who has lost the faith of his board and an ex-CFO who is being accused of shady financial practices? And would you pull  the buy trigger if the company has delayed its scheduled annual filing by more than two months, and by doing so is running the risk of violating debt covenants and being pushed into default? And to top it all off, would you be a...

Negative Interest Rates: Impossible, Unnatural or Just Unusual?

March 11, 2016 Comments (0)

In the years since the 2008 crisis, there is no question in finance that has caused more angst among investors, analysts and even onlookers than what to do about "abnormally low" interest rates. In 2009 and 2010, the response was that rates would revert back quickly to normal levels, once the crisis had passed. In 2011 and 2012, the conviction was that it was central banking policy that was keeping rates low, and that once banks stopped or slowed down quantitative easing, rates would...

Lazarus Rising or Icarus Falling? The GoPro and LinkedIn Question!

February 23, 2016 Comments (0)

As I watch GoPro and LinkedIn, two high flying stocks of not that long ago, come back to earth my mind is drawn to two much-told stories. The first is the Greek myth about Icarus, a man who had wings of feathers and wax, but then soared so high that the sun melted his wings and he fell the earth. The other is that of Lazarus, who in the biblical story, is raised from the dead, four days after his burial. As investors, the decision that we face with GoPro and LinkedIn is whether like Icarus,...

Management Matters: Facebook and Twitter!

February 19, 2016 Comments (0)

I am not a big user on social media. I have a Facebook page, which I don’t visit often, never respond to pokes and don’t post on at all. I tweet, but my 820 lifetime tweets pale in comparison to prolific tweeters, who tweet that many times during a month. That said, I have been fascinated with, and have followed, both companies from just prior to their public offerings and not only have learned about the social media business but even more about my limitations in assessing their values. The...

The Disruptive Duo: Amazon and Netflix!

February 17, 2016 Comments (0)

Amazon and Netflix! Need I say more? Just the mention of those companies cleaves market participants into opposing camps. In one camp are those who believe that those who invest in these companies are out of their minds and that there is no way that you can justify buying these companies, perhaps at any price. In the other are those who argue that the old time value investors don't get it,, that these companies are redefining old businesses and will emerge as winners, thus justifying their...

Race to the top: The Duel between Alphabet and Apple!

February 15, 2016 Comments (0)

Apple and Alphabet, the two companies jockeying for the  prize of “largest market cap company in the world” are both incredibly successful businesses, with unparalleled cash machines (the iPhone and Google Search) at their core. That said, the last month has been eventful for both companies, just as it has for the rest of the market, as their latest earnings reports seem to suggest that these firms are on divergent paths. Having valued Apple multiple times on this blog over the last five...

A Violent Earnings Season: Pricing and Value Perspectives

February 8, 2016 Comments (0)

The earnings season is upon us once again, the quarterly rite of passage where companies report their earnings results, the numbers get measured up against expectations, expectations get reset and prices adjust. As an investor, I sometimes find the process unsettling, but as a market observer, I cannot think of a better Petri dish to illustrate both the magic of markets and the vagaries of human behavior. This earnings season has been among the violent, in terms of market reaction, in quite a...

January 2016 Data Update 8: Pricing, with an end of month update

February 1, 2016 Comments (0)

If you have been tracking the posts that I have about my data updates, you probably noticed that early on, I had planned eight posts but that this shrunk to seven by the time I was done. The reason was that the last post that I was planning to make was going to be on pricing numbers, i.e., the multiples that companies are trading at around the world, relative to book value and earnings. However, as the market dropped in January, I decided that posting the PE and EV/EBITDA multiples from...

Corporate Finance 101: A Big Picture, Applied Class!

January 30, 2016 Comments (0)

In my last seven posts, I played my version of Moneyball with company data from the end of 2015, looking at how companies invest their shareholders' money, how much they borrow and the determinants of how much cash they return to stockholders. That structure is the one that underlies the corporate finance class that I have taught every year since 1984, the first two years at UC Berkeley, and the last 30 years at the Stern School of Business. Each semester, for the last few years, I have also...

January 2016 Data Update 7: Dividends, Potential Dividends and Cash Balances

January 27, 2016 Comments (0)

In the last six posts, I have tried to look at the global corporate landscape, starting with how the market is pricing risk in the US and globally, how much investors are getting as risk free returns in different currencies and then moving on to differences across companies on the costs of raising funding (it varies by sector and region),  the quality of their investments (not that good) and their indebtedness (high in pockets). In this, the last of these posts, I propose to...