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LinkedIn Networks With Amazon (LNKD, AMZN)? 1.28.2013

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AMZN is the premier international online retailer. The company serves consumers through its retail websites and focuses on selection, price, and convenience. LNKD, on the other hand, is the most popular professional networking website. LNKD offers a variety of professional services for career advanement. Both companies embrace technology in order to drive growth.

LNKD and AMZN both spend a lot of their cash on reinvestment. For example, just under 60% of LNKD revenue was spent on sales/marketing and product development. This kind of investment positions the two firms to benefit in the long run.

The LNKD situation is, interestingly enough, very similar to AMZN. AMZN spends a large portion of its cash on improving its distribution centers and preparing itself to have economies of scale for the future. These two stocks have rich PE multiples and both trade in a similar fashion. This thesis can be tested. The 55-day (a Fibonacci number) price correlation between the two stocks is 0.88. This coefficient is very strong. A reading of 1.00 represents a perfect positive correlation and readings above 0.75 are generally considered strong. This figure simply quantifies the severity of relationship (positive or negative). Therefore AMZN will be a stock to watch for LNKD investors.

Spending for the long-run seems fine, however renowned economist John Maynard Keynes one said, “We are all dead in the long run.” They may be planning for the long run, but if these two companies continue to put up underwhelming EPS the market may eventually discount their massive forward and trailing PE multiple.

salerno.mark.a@gmail.com

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AAPL and iPad Mini Update (AAPL, QQQ) 10.22.2012

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The tech giant has been on a slide as of late, more specifically since hitting $700. Shares are off nearly $100 from the all time high. It can be hard not to get emotional considering the massive amount of money the average individual investor has allocated to AAPL.

            According to a recent study done by SigFig, “Nearly 17% of all individual investors own Apple shares.” And according to the same data, AAPL has three times the level of ownership of another widely held stock, GOOG. Interestingly enough, of the AAPL investors’ sample set, they on average have 17% of their portfolio allocated to AAPL. This is confirmed with other data, nearly 60% of the float is owned by investment managers and the top 50 investors in AAPL actually own about 43% of the company. To that point, nearly 15% of the AAPL float is allocated to index funds. And finally, the largest shareholder is Fidelity Management according to recent data. This is all very important, for it is vital to know the nature of the selling and buying done everyday, along with the corresponding personality of investors.

           The AAPL analyst community already has high expectations for the device; for example Piper Jaffray expects AAPL to capture 50% of the 7in market upon release. On the other side of the analyst community, KGI Securities analysts Ming-Chi Kuo expects the cost breakdown to be around $195 for the 16 GB wi-fi version and at the higher end up to $254.50 for the 64GB, LTE + Wi-Fi edition, then perhaps one can add into that figure the typical 40% AAPL margins they so thoroughly enjoy.

            The market leading iPad 3 is 9.7 inches; some analysts and AAPL followers are expecting a 7.85 inch liquid crystal display (LCD). These dimensions are slightly different than the prevailing 7-inch norm. The heaviest competition is expected to come from the ANZN Kindle Fire and the GOOG Nexus 7; both of which have fresh models out on the market already. The new 7” Kindle Fire is priced at $159.00. At this price point AMZN is expected to just break even considering the cost breakdown, but everything after that, including items like books and movies, is what AMZN is really in the tablet business for. AAPL is expected to naturally price at the higher end of the market.

            AAPL is currently pinned between the 100 and 150 day moving average. The average price target is about $789 and for the upcoming earnings on Thursday the current quarter’s estimate is about $8.92. Of the 39 analysts who cover the stock, 97% of them rate Apple either a “strong buy” or “buy.”

Feel free to e-mail any comments, feedback, suggestions, or general inquiries to…

Author

mark@keeneonthemarket.com

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iPad Mini: What We Know (AAPL, GOOG, AMZN) 10.9.2012

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For the first time in a while AAPL is not the first mover in this space. This could turn out to be an advantage, for being first does not always equal success. Players like AMZN, HPQ, BKS, GOOG, and RIMM have all pumped out smaller tablet devices.  While some are clearly more successful than others, AAPL will still need to differentiate the iPad mini with their iconic slick design and user-friendly operating system, for savvy consumers will maximize their hard earned buying power.

The market leading iPad 3 is 9.7 inches; some analysts and AAPL followers are expecting a 7.85 inch liquid crystal display (LCD).  These dimensions are slightly different than the prevailing 7-inch norm.  The heaviest competition is expected to come from the ANZN Kindle Fire and the GOOG Nexus 7; both of which have fresh models out on the market already. The new 7” Kindle Fire is priced at $159.00. At this price point AMZN is expected to just break even considering the cost breakdown, but everything after that, including items like books and movies, is what AMZN is really in the tablet business for. AAPL is expected to naturally price at the higher end of the market. Some reports have surfaced regarding Apple suppliers facing production delays. Staying on track for the unconfirmed rumored release date of Oct. 17th 2012 will be a challenge.

The ‘Apple edge’ really just dominates the competition. This includes the 680,000 apps, ecosystem, and massive following. It is hard to quantify Apple’s social clout, but as of late, anything they engineer turns to gold or at least a few billion in market capitalization. A lot is expected from the iPad mini, but it is hard to make judgments this early.

E-mail the author with any comments, questions, or inquiry mark@keeneonthemarket.com.

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Is it Organic to Fill the Gap 9.25.2012

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HAIN Gap Analysis:

Hain Celestial has given back all of its post earnings price action, but the question now is…will it give back its earnings gap up. HAIN has a short interest of nearly 11%; this figure has interestingly enough been tracking up with the stock as shares have raged over 90% YTD. The 50 day is roughly at $61; which is right on the 50% Fibonacci retracement level. HAIN also had a textbook dark cloud cover bearish reversal at its top. The dark cloud cover pattern, highlighted in chart 1 below, shows that the bulls advanced the stock to a new high, only for the stock to gap higher the next day and fail closing lower; taking out the prior day’s low.

 mark1

The current pattern in HAIN looks like another momentum stock…AMZN; post one of its earnings (see chart 2). Here AMZN gaps higher, rallies for some time, but eventually came back to test where it came from and held.

 mark2

TFM Gap Analysis

Bearish Belt Hold Line: Here TFM made a new all time high but promptly retraced all of the gap; and more.  A bearish belt hold is a long red candle that opens at the day’s highs and later closes at, or near, the lows. This pattern is considered to be a top reversal at a high price level. TFM, being clearly rejected, has consolidated and respected the lower end of this candle, but may be looking to break out…for it closed above its 50 day moving average and has been consolidating in a tight right triangle trading at a very low relative average true range (ATR). All below in chart 3.

mark3

WFM Gap Analysis

WFM traded down as a result of “collateral damage” after CMG dropped an earnings growth bomb on the market back on 07/19/12.  WFM proceeded to then gap higher after its earnings. This retraced all of the negative CMG action. The market basically said WFM should not trade down because of CMG; consequently this gap will probably not fill in the short term.

The last three candles in the WFM chart may be forming a stalled pattern. This is where the trend slowly starts to fade and indicates a reversal. The loss of momentum is shown as candlesticks get smaller, ATR goes flat and lower, and Bollinger-band width tightens. Chart 4 & 5 below.

mar4

Mark5 

 UNFI Gap Analysis

UNFI gapped down after their Q4 and full year fiscal 2012 earnings release.  The low tick of the gap down candle was $0.50 away from the 100 day moving average; perhaps as traders realized value or at least liked a support level for a potential trade with a $0.50-ish stop. Additionally, the candle body battled above the 50 day moving average, and gave it a long bottoming wick (see chart 6). A long bottoming wick is a ‘wicked’ powerful pattern especially if a bullish confirmation bar accompanies it. As we come back to prior highs it will be important to watch price, as unhappy buyers (prior to earnings) had to sit through a stressful time and may want out.

 mark6

Feel free to e-mail any comments, feedback, or general inquiries…

Author

mark@keeneonthemarket.com

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Morning Rage 9.11.2012

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Amazon.com, Inc. (AMZN | $256.67) is down less than a half of a point in pre-market trading. Amazon recently released the HD Kindle Fire, to be available at the end of November. Amazon is competing in a market where PC makers have continually failed to take the dominant position from Apple, which has more than half of the entire tablet market. Apple, Inc. (AAPL | 662.74), which is up 2.25 points in pre-market trading, gets its strength from having multiple matching devices that focus on simplicity for the user. Everything is fluid for the user, including the shape and style of all the products.

The one company capable defeating Apple in my opinion, Google (GOOG | 700.77), which is up almost 7.00 points in pre-market trading, has yet to stamp their logo on the outside of sleek hardware. I would also expect Apple to continue pushing other companies off of its platform by taking over their products and services. Apple will hold on to its dominance for a long time. However, the market is saturated with new iPhones and I don’t expect all of the iPhone 4 users to drop their somewhat new phones to get an iPhone 5, due to release Wednesday. This release will not be the same for Apple.

International trade data will be released today. The important data for US markets is the trade gap between exports and imports. I can’t be sure where the US is exporting to with Europe in a mess and China’s growth slowing for almost half of a year. The trade balance is said to continue higher with an estimate over -44.3 Billion. This report will be released at 8:30am EST. 

Alex Kalish has a masters in economics from Suffolk University.

Contact: alexk@keeneonthemarket.com

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Morning Rage 9.6.2012

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The big story of the morning comes from Europe, as news from the European Central Bank drove the EUR/USD up higher 0.31%. Oil, Gold, and Silver futures all moved higher 1.09%, 0.95%, and 1.69% respectively. US indices futures are all up around 0.5%.

Navistar International Corp (NAV) moved 2% yesterday after a positive earnings report. Third quarter income was $84 million compared with last year’s 1.4 billion. Revenues in the third quarter were down 6 percent from the third quarter of 2011. The EPA issued a ruling on NCPs for highway diesel engines last week but NAV claims it is prepared with plans to transition to a new clean engine solution by 2013.

Amazon.com Inc. (AMZN) is said to reveal a new Kindle Fire product. An ad last night showed the new Kindle e-read and new Fire. Last week Amazon announced that it had sold out of the Kindle Fire. AMZN is sitting at 246.50.

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Morning Rage 9.4.2012

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Facebook Inc. (FB | 18.06 [ -5.40%]) is once again at a new low since the IPO in late May. FB is now more than seven points below its fifty day moving average. FB had a high in August that jumped over $22 but has been below $20 for most of the second half of the month. In pre-market trading today, FB dropped another half of a percentage point to 17.97. Where is the bottom? Amazon.com Inc. (AMZN | 248.72 [+0.18%]) sneaks higher overnight, trading about 120 thousand shares and edging higher $0.45.

A market moving report, the ISM manufacturing Index, will be released today at 10:00 AM EST. The ISM surveys 300 manufacturing firms on employment, production, new orders, supplier deliveries, and inventories. Readings above 50 percent indicate expanding, while below indicates contracting. Fed surveys have some southern cities improving while some New England cities continuing to be negative in the index, leaving the consensus before announcement below 50.