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mikecart1 (98.93)

Predict the Future With Your Eyes, Not With Numbers!

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February 25, 2011 – Comments (7) | RELATED TICKERS: NFLX , MSFT , SRZ.DL2

The world is changing.  I didn't need to tell you that.  Can you see it?  Do you look around and see the differences?  Do you see what it was when you were growing up to now?  Can you then predict what it will be in the future?  It shouldn't be too hard if you just look around with your EYES!

A lot of buys today could be done by just understanding where the world is heading, by predicting where products are moving towards, where technology is taking us.  Let's get to the point as I talk about stocks and their past, present, and futures.  Disregard stock price for now.  Short term fluctuations are clear.  Long term fluctuations generally follow macro economic and technological trends.

Stocks

NFLX: What can I say?  I could talk about the stock price but let's disregard that.  Let's see where it was.  It is a distributor of software.  That is what it is.  It distributes games and different video to you.  Now, how they do that might change.  In fact, it has.  It went from mailing the actual software to sending it to you electronically.  Can you see how a company like this would decline?  I don't.  If the current trends continue, Netflix should be around a long time.  Friends use it.  The business model seems simple.  Although there is some fishy things going on in the financial world of Netflix, it is clearly the leader in this market.

WEN: A namebrand and fast food chain that is going down.  You drive past them and they are empty.  Buildings are falling apart, parking lots are damaged, insides seem dirty.  How does Wendy's come back like a McDonald's of 2002-03 era?  You do what I've been saying for years.  You renovate, you renew, you clean, you improve.  These are things Wendy's refuses to do.  It is probably because they lack the leadership or the willpower.  All I know is that if I generally don't like a food place, others don't.  This company will continue to be below mediocre until something changes.

MSFT: A company that was destined for world takeover is now slowly losing to itself, open source software, and to other competitors.  The company that sees the way to deliver software that works for less money and is most reliable will win.  Microsoft doesn't appear to be that company.  I'd like for someone to tell me why I'm using half a gig of ram just to run the OS I'm using here to type this out.  Makes no sense when you figure the OS has changed very little from a system's standpoint since Windows 2000.  It must be the graphics!  Yes, that is it!  All those extras that do nothing but slow the computer down.  Vista doesn't help either.  Also Sony is keeping the XBOX at bay as well.  Bill Gates is getting older and the company seems to have surrendered itself to creating new breakthrough products.  This is only true if you don't think they can team with Nokia to create something great.

SRZ: Retirement home company that is on the way up.  Do you believe it though?  After selling off a bunch of properties, they produced a great quarter this morning.  I used to own SRZ at around $3.  Sold for a decent profit.  Will have to see what it does.  But let's look bigtime.  Retirees will increase greatly the next 10 years.  Where will they stay?  If SRZ can get out of debt, the future share price could be very unfamiliar when compared to today's price.

TSLA: Now do you really believe gas will last forever?  What better company to invest in than the front runner of electric cars?  They could be to the electric automobile what Ford was to the gasoline automobile.  The future dividends of a buy order today is uncertain.  The stock could very well drop gradually the next few years until the first cars hit the road for the typical middle class consumer.  But when it does, who will be there to compete?  This could be a monopoly in the making.  Only time will tell.

Other Trends

Doing some brainstorming, here are ideas I came up with that could completely change the game for their own markets:

1) How about fast food in the grocery store - the frozen food section?  You see PF Changs doing it.  You see TGIFridays doing it.  How about having something call McDonald's Breakfast to Go that requires about 1 min of heating time in the microwave?  This could be a market that would work.  

2) Speaking of cell phones, how about we really flip the script.  People want cool.  People want reliability.  People want durability.  People want something that is trendsetting.  How about the Watch Phone.  Watches these days are getting bigger and bigger on the face.  In fact, you will see watches will faces that are nearly the width of the wrist.  How about a watch (maybe from Nokia/Microsoft), that is actually a phone but also tells time.  It can be touch screen, about the size of a iPod Shuffle, and you can do call like that?

 

Cheers!

:o]

7 Comments – Post Your Own

#1) On February 25, 2011 at 2:27 PM, chk999 (99.97) wrote:

TSLA: Now do you really believe gas will last forever?  What better company to invest in than the front runner of electric cars?  They could be to the electric automobile what Ford was to the gasoline automobile.  The future dividends of a buy order today is uncertain.  The stock could very well drop gradually the next few years until the first cars hit the road for the typical middle class consumer.  But when it does, who will be there to compete?  This could be a monopoly in the making.  Only time will tell.

This one I'm pretty unconvinced on. The reason is that the auto industry is one with brutal operating leverage and I would be thunderstruck if Tesla ever got to selling enough units to amortize the fixed costs over. They can't make a profit with $40-50k cars in limited production. And they can't get production up enough to drop the price. Plus they will have crushing competition from Toyota and Nissan.

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#2) On February 25, 2011 at 2:56 PM, caterpillar10 wrote:

You are right. The only serious money guy I know of that took simple observation and anecdotal evidence seriously was Peter Lynch. He would combine it with heavy research and number crunching but was famous for starting with the obvious.

Example: It's the early 70s. Women are pouring into the workforce like never before since WW2; but that was plants this time it's offices. He's going thru the check-out at a grocery store and notices the L'eggs racks right by the front by the front end and that ladies are tearin'em up on the way out. He cruches Hanes the next day and start's loading up his funds, eventually scores huge. It's one of the things that put him on the Nat'l map as a $manager. 

My best Lynch moment demonstrating that an idea can come from almost anywhere: 5 years ago I had a Hispanic ladyfriend. That only figures in because she looooves to watch white people acting stupid. I will leave that personally alone except to mention she is a BIG FAN of Andy Griffith Show reruns which I would never consider on my own. One day, ol' Earnest T. Bass is settin' up yet another still back in the woods. I notice the the loops of coiled copper tubing involved and think: hmmm - heat exchange - I'll bet that's a whole different ball game nowadays.

A few days of research later I find GTLS....tiny, but totally ocb on engineering quality and a mouse that roars around the world in their niche living in a state of perpetual backorder. You can see for yourself....seems toppy now so I'm 100% out for the first time since then but am uneasy about that so have a low limit order in, just in case. 

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#3) On February 25, 2011 at 3:10 PM, ikkyu2 (99.11) wrote:

You do realize that your pitch for NFLX was the kind of innumerate pitch people were making for MSFT 5 years ago?  "It's the market leader, always has been, people use computers, so it always will be!"

Since you don't like numbers, tell me this: where do you see Netflix's durable competitive advantage being?  In other words, what is their "moat" to competition?

 It's a question MSFT investors should have asked themselves 5 years ago. 

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#4) On February 25, 2011 at 3:13 PM, ikkyu2 (99.11) wrote:

And with regard to your TSLA pitch: "Now do you really believe gas will last forever?  What better company to invest in than the front runner of electric cars?  They could be to the electric automobile what Ford was to the gasoline automobile."

Why couldn't Ford be to the electric automobile what Ford was to the gasoline automobile?  They are certainly far better positioned than TSLA, with a nationwide network of dealers, brand loyalty, an ongoing ad campaign, and an incredible world class knowledge base in the areas of automobile design, engineering and production.  Not to mention their extensive department devoted to understanding and interpreting government regulations relating to automobiles. 

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#5) On February 25, 2011 at 3:20 PM, ETFsRule (99.92) wrote:

Any concern over Amazon undercutting Netflix with the pricing of their online movie service?

There is also a lot of free entertainment on the web, with sites like Youtube, Hulu, etc. Netflix is actually a pretty high-risk stock in my opinion.

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#6) On February 25, 2011 at 4:56 PM, mikecart1 (98.93) wrote:

chk999)

That's a good point about not being able to produce enough to profit.  I didn't think of that.  However, being first to market in a particular market has usually benefited for the most part in recent years.  Or the first to an idea.   I guess it will depend on if they can get the funding behind their goals.  Toyota and Nissan might be crushing from an enterprise and brand name standpoint but I see people using Tesla in the same way people use Apple products today - for their statement of class standpoint.  Or it could vanish like DMC lol.

caterpillar10) 

Hard to follow what you are saying lol.

ikkyu2)

Microsoft thought it would live forever because they underestimated the power of open source software and they failed to see the problem to their product which is that people don't need a new operating system every year.  NFLX isn't quite the same.  NFLX makes money through a service.  MSFT makes money through a product - and a particular one at that - one that they must make people feel they need in order to make sales.  When people start seeing the value in Linux or another OS, MSFT will continue to lose market share.

Good points about Ford.  Only time will tell I guess.

ETFsRule)

Amazon is already working on thin margins.  They are trying to be the Wal-Mart of the internet and soon will be - will little growth.  Amazon does a lot more than Netflix so they could take a loss on online movie service but that would go against my MBA classes that taught about  Entry Barriers lol.

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#7) On February 25, 2011 at 8:40 PM, ikkyu2 (99.11) wrote:

I don't mean to be negative; I guess for every bull argument there's a bear on the other side.  For what it's worth, I think NFLX is currently best of breed but has absolutely no defense against competition; they are a glorified middleman.  (Wasn't true when they were mailing DVDs all over creation; that model really was a barrier to entry.)

I like TSLA.  I like Musk as a manager and a get things done guy.  I do, however, suspect that TSLA's primary goal is to enrich management and that the most likely outcome will be a merger or acquisition by one of the major autos; no idea how favorable that'll be to TSLA shareholders.  I managed to snag some TSLA on that day it traded at $15; owned it up to 25 and sold it and don't really regret doing so. 

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