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Buy, Sell or Hold: The Real Winner in the Yahoo (YHOO) vs Facebook Fight Could Be Augme Technologies (AUGT)
I love to find asymmetric risk/reward scenarios in the market.
You can do that with a small company which has the ability to unlock a large payday – and I believe I have found one with Augme Technologies Inc. (OTC: AUGT ).
To understand the value of mobile marketing company Augme, first we have to look at what Yahoo! Inc. (Nasdaq: YHOO) has done to Facebook.
Ripples shot through the technology space last week when Yahoo launched an all-out patent assault against Facebook.
Yahoo is demanding billions in licensing fees for the use of its technologies.
Yahoo has asserted claims on patents that include the technical mechanisms in Facebook's ads, privacy controls, newsfeed and messaging service.
In simple terms, Yahoo is getting ready to try and bring Facebook to its knees through legal means.
"Yahoo has a responsibility to its shareholders, employees and other stakeholders to protect its intellectual property," a Yahoo spokesman said in an e-mailed statement. "We must insist that Facebook either enter into a licensing agreement or we will be compelled to move forward unilaterally to protect our rights."
Should Yahoo sue Facebook, it would mark the first major legal battle among technology giants in the social media sphere.
Yahoo's patent claims come hot on the heels of Facebook's IPO announcement to raise money that would roughly give them a $100 billion valuation.
This lawsuit threat can only have Facebook's management, its bankers and lawyers rushing to secure some sort of defensive arsenal to fight off this and other pending attacks.
While this battle has captured everyone's attention, what I find more interesting is Yahoo's seemingly blatant hypocrisy.
Yahoo appears to be throwing rocks from its glass house at the neighbors by wanting to make others pay for the unauthorized use of its patented technology.
What Yahoo is seemingly trying to ignore is that it, too, has been accused of the same type of intellectual property theft – and the accuser is Augme Technologies.
Buy, Sell or Hold: Buy the Dips in Gold (NYSE: GLD)
SPDR Gold Trust (NYSE: GLD) experienced a major pullback on Leap Day this week, dropping almost exactly 100 points on the day.
This happened while the European Central Bank (ECB) offered its second tranche of three-year Long Term Recapitalization Operations (LTRO).
The sell-off in gold on Wednesday is a related sign that liquidity is currently in demand.
But you only have to look at gold's big move up since the start of 2012 to know this stage of the move was unsustainable short-term.
It's why investors shouldn't be surprised by the pullback, and should use this latest move down to increase their long-term exposure to gold.
This dip is a buying event and nothing more.
The pullback in the price of gold also hit equities along with bonds and some other commodities.
Even so, it appears that the ECB has provided enough liquidity to fight off the near-term fears.
Once these funds begin to work their way through the system, I believe they will be bullish for commodity prices.
Over time, banks will eventually put that capital to work, with an eye toward generating a positive rate of return on it. One of those avenues will undoubtedly be gold.
Here's why, along with a bit of background.
Amazon.com Inc. (NASDAQ: AMZN) Will Get Burned by the Fire
Amazon.com, Inc. (NASDAQ: AMZN) has lost its focus.
The pioneer of clicks for sales has decided it wants to be the next Apple Inc. (NASDAQ: AAPL).
But there's a big difference between selling other people's products for a profit on a Website and becoming the provider of custom hardware solutions for retail buyers.
This transition isn't going to end well.
The Amazon Fire is a chopped-down tablet designed to compete with the iPad. There is a world of difference between the two products and where they are in their lifecycles.
Amazon is selling its Fire tablet for half the price of the iPad, which looks great on the surface. When you compare exactly what each product brings to the table, though, it's obvious the iPad 3 (due in mid-March) will douse the Fire.
The iPad 3 will have a slew of hardware enhancements over the last iPad, and while iPad 2 was a generational upgrade over the original, it still caught the world by surprise.
The tablet market has tried before to build a better-valued product to compete with the iPad, which is where the Amazon Fire comes into play.
The reality is that the Fire is a first-generation equivalent to the iPad but with smaller physical size and limited features.
The Fire is easily two years behind the curve in the Apple-equivalent build cycle of features for same purchase price. Two-year-old technology is an eternity when you're competing against the best product designers on the planet.
This is important because the bar continues to rise, and Apple can start to sell a similar product with a premium feature set at a slight markup, destroying Fire's niche.
This weakness is a terminal issue in my opinion.
When you think about it, Amazon is subsidizing the construction and sale of the Fire, with estimated losses on each unit, as it deploys them around the world to users.
This makes me wonder when the pain of the Fire will cause Amazon to adopt a less volatile business plan.
So it's time to sell Amazon.com Inc. (NASDAQ: AMZN) (**). The Fire will continue to burn investors in Amazon for quarters.
Buy, Sell or Hold: BOK Financial Corp. (Nasdaq: BOKF) – the Only Bank Safe Enough to Buy
I was on the road lately and had the chance to drop into the Bank of Oklahoma's main branch in Oklahoma City. Upon entering, it was obvious these were prudent, old-school bankers. No matter the floor I was on, quiet and calm ruled.
That's the pace of banking I like.
Indeed, there are two types of banks in the world: The old-school banks, and the modern, frenzied versions that blew up in 2008.
Obviously, the latter are rightly hated in my opinion. The excessive leveraging of the bubble era has left the world's banks severely weakened. Since 2007, the non-stop deleveraging going on in the global economy has left banks on life support, propped up by their national balance sheets. And the velocity of money has slowed to a crawl.
Yes, in most cases the banks have paid back their TARP funds – but the stigma remains.
Citigroup Inc. (NYSE: C), Bank of America Corp. (NYSE: BAC), and Wells Fargo & Co. (NYSE: WFC) all needed bailing out. And both Goldman Sachs Group Inc. (NYSE: GS) and Morgan Stanley (NYSE: MS) had to convert their charters to bank status to hide from the reality of their own numbers.
They blew up. It's that simple. Wall Street failed.
However, not all banks blew up, failed, and needed government aid to keep their doors open.
I've been watching Bank of Oklahoma's parent for a while now, even before my visit inside their building, and they're one of the banks I consider a solid institution.
This is a contrarian bank. They skipped TARP. They didn't need access to the capital, even if markets were locked up. Their dividend rate is still going up and their earnings are growing.
So it's time to buy BOK Financial Corp. (Nasdaq: BOKF) (**).
Buy, Sell or Hold: When to Buy Shares of Facebook
You might have heard….
The recent registration of the company's IPO documents means it won't be long until Facebook shares begin trading freely.
But will Facebook shares make you rich beyond your wildest dreams like mural painter David Choe?
Or would you be better off watching from the sidelines before you buy shares of the social media giant?
The Details behind the Facebook IPO
Here's what I've learned from Facebook's S-1.
Some of the data points buried in the IPO document are eye-opening, to say the least.
Chief among those are Facebook's assertion that 6% to 7% of the entire world population logs in every day. More importantly, they stay logged in for a significant amount of time.
However, what will happen in the future to drive the stock's share price after it's brought to market is buried deeper in the details.
It's these details that make Facebook's IPO a hold if you already own shares, but also a "wait to buy" if you are like most people and want to own them.
In a nutshell, what I've learned is the banks are bringing Facebook to market fully priced.
My opinion is the bankers have gotten greedy and decided to push the valuation numbers above the levels that I believe are sustainable.
The company is being valued at $75 billion – $100 billion dollars at launch. This would make it one of the most valuable companies in the world, yet its actual revenue, let alone profitability, is at a more mundane level.
Currently, Facebook is reporting about $4 billion in revenue and profits of $1 billion.
That means if Facebook prices in at the top of its estimated range ($100 billion), based on current disclosures it would have a 100-to-1 price to earnings (P/E) ratio.
In other words, it's only going to take about 100 years for Facebook to eventually earn what it may price at. Compared to other blockbuster stocks, that's quite rich.
By comparison, Apple Inc. (Nasdaq: AAPL) has $100 billion in cash and a P/E ratio of 11 while Google's P/E is 20.
That's why it's time to "Hold" Facebook (**) or wait to buy it until insiders get a chance to sell their shares and bring the price down to levels common people can realistically afford to purchase.
Buy, Sell or Hold: A Look at Carnival Corp (NYSE: CCL) After the Costa Concordia Tragedy
Carnival Corp. (NYSE: CCL) is the world's largest provider of vacation cruises operating under the names Carnival Cruise Lines, Holland America Line, Princess Cruises, and Seabourn in North America; and AIDA Cruises, Costa Cruises, Cunard, Ibero Cruises, and P&O Cruises in Europe, Australia, and Asia.
As you know, Carnival has been all over the news lately because of the deadly sinking in Italy, when the Costa Concordia suffered one of the largest cruise ship accidents in decades.
Since then, Carnival Corp. shareholders have taken some steep losses. Shares are down nearly 12%.
For investors, that leaves the question of what will happen to Carnival Corp. in the wake of the tragedy.
However, from strictly a business standpoint what investors need to know is that the ship is fully insured and at this stage it is the reinsurance firms that will have to fund the refloating and fixing costs.
So as tragic as the disaster has been, Carnival Corp. will survive.
According to a Carnival Corp. release, "the impact to 2012 earnings for loss of use is expected to be approximately $85-$95 million or $0.11-$0.12 per share."
The larger concern, as management admits in the very next sentence of the release, is that "the company anticipates other costs to the business that are not possible to determine at this time." (Full release)
So our problem here in deciding whether to buy, sell, or hold CLL are the after-effects of the accident, such as whether or not people will decide to book vacations on any of Carnival's brands.
More importantly, we won't be able to measure year-over-year comparisons for first quarter bookings until quarter end, and we won't be able to tease the bookings data for quarters two, three, and four for almost a year, when full data will be available.
However, while the company is probably going to be looking at a slower-than-expected year, I believe insurance and the diversity of assets make the Costa Concordia disaster a unique one-off event.
As a result, it's time to "Hold" Carnival Corp. (**).
Buy, Sell or Hold: Dump Petroleo Brasileiro S.A.(NYSE ADR: PBR) Before Its Stock Gets Drilled
At first glance, Petroleo Brasileiro S.A. (NYSE ADR: PBR), or Petrobras, looks like a quality investment…
But looks can be deceiving – and in the case of Petrobras, surface-level success is hiding some serious blemishes.
No doubt, Petrobras is one of the top five major energy companies in the world. And the offshore discoveries made off the coast of Brazil over the past few years have been remarkable.
However, these reserves, while large, present problems of their own. The oil they hold will be costly and difficult to extract, and legal red tape and government interference are further complicating matters.
Additionally, new sources of shale oil are proving more reliable and convenient than such precarious deepwater drilling operations
So it's time to sell Petroleo Brasileiro S.A. (NYSE ADR: PBR) (**), before the only thing getting drilled is its stock.
Into the Deep
Deepwater drilling is hard enough to begin with. Imagine what it takes to force high-pressure/high-heat fluids into chilled production equipment sitting on the ocean floor.
That's no easy task. And in Brazil's case, it's made even more challenging by a thick layer of salt sitting above the oil.
The Carioca field, for instance, is 170 miles offshore, more than 6,000 feet below the surface of the water, and trapped beneath a shelf of salt 500 miles long and 125 miles wide.
The trouble is, it's beyond both Brazil's and Petrobras' capacity to fully fund or provide the level of drilling expertise to carry out these projects. So they must rely on international experts and new, unproven technology to make these deepwater fields productive.
This is a risky strategy – not to mention an expensive one.
The first wells drilled in the exploration cost as much as $100 million each. Petrobras' development plans for 2011-2015 include $224 billion in total investments to fund 688 projects.
As if these headaches weren't enough, Petrobras was thrown another curveball in December.
Buy, Sell or Hold: CARBO Ceramics, Inc.(NYSE: CRR) Are the Glory Days Over?
CARBO Ceramics, Inc. (NYSE: CRR) is one of those companies quietly making a killing in today's economy.
Thanks in large part to the natural gas boom, CRR is up over 328% off of the 2009 lows.
However, how long it can maintain its status as a high-flier is another matter entirely.
In fact, I expect that CARBO's entire business model is about to come under attack, which is why now is a good time to sell.
The Risks Behind Horizontal Fracking
But there is risk behind these boom towns…