Daily Investment Tips

When Warren Buffett made a $10 billion investment in IBM, we asked what had he seen? And the answer could be in a 12 May 2010, investor briefing report by IBM.

In that investor conference call, IBM chairman and CEO Sam Palmisano outlined his next five-year plan.

CEO Sam Palmisano told any one who cared to listen then that he expects earnings per share to be at least $20 and generate free cash flow of $100 billion for fiscal 2015. He was essentially claiming the company expected profit to double in six years time. That rate would equate to a 12.23% annual earnings growth rate, which is supremely impressive considering the size and maturity of the company.

When they make bold forecast / prediction like this, they mean business,

In May 2007 it introduced a three-year plan to achieve $10 per share by the end of 2010. It hit that target one year early, at the end of 2009.

The CEO back then said that this impressive earnings growth would primarily come from greater focus on more profitable business lines like software. He avowed that IBM will continue to create solutions that help their clients increase efficiency through cloud computing services and infrastructure and electricity monitoring and analytics systems.

IBM Stock Prediction & Forecast

As we write this, IBM stock is at 188 and has a EPS of 12.64 and PE of 14.93. If indeed by 2015 the EPS hits $20 and we give it a very conservative PE of 10, the stock will be at $200. Keep in mind, Historically, IBM has traded for 12.2x to 18.1x cash earnings per share.

You can read and listen to that IBM Conference call at IBM Investor relations page.

written by Constantine Njeru \\ tags: Cash Earnings, Ceo, Computing Services, Conference Call, Earnings Growth, Earnings Per Share, Free Cash Flow, IBM, Investor Conference, Investor Relations, Profitable Business, Sam Palmisano, Stock Prediction, Warren Buffett

These days, Apple is worth about $375 billion, with shares up about 25 percent, to $403, this year. If the stock gains an additional 12 percent, Apple will have the world’s largest market value, surpassing ExxonMobil. In the last 11 years Apple has risen from low tens to the current levels.

Many are wondering am I late to the party, has the stock risen too high and you might buy at the top?

Analyst interviewed by Businessweek magazine think, Apple best days are still ahead and the stock is still rated a buy.

White isn’t worried about Apple’s abruptly coming down to earth. If anything, he and a handful of other analysts think Apple watchers on Wall Street may be substantially underestimating the potential of the company, which still only has a single-digit market share in mobile phones and personal computers. “I don’t remember a company of this size growing at this pace,” says White, who recommends the stock and predicts it could be worth $617 billion within a year—the Street’s highest target. “We can’t even model out some of the possibilities: an Apple TV set, huge growth in China, businesses racing to buy Apple laptops. It’s like a religion. It sounds crazy, but it could still be early for Apple.”

To understand the confidence don’t look at the raw number, look at the fundamentals. While Apple shares have soared higher, they’ve become cheaper in relation to earnings. The reality is, Apple profits have been growing faster than the share price.

written by Constantine Njeru \\ tags: 11 Years, Apple Laptops, Apple Stock, Apple Tv, Businessweek, Businessweek Magazine, Buy Laptops, China Businesses, Coming Down To Earth, Exxonmobil, Handful, Market Share, Mobile Phones, Personal Computers, Possibilities, Share Price, Stock Analyst, Stock Gains, Target, Wall Street

Nearly every analyst following Apple Inc, rate Apple shares a “buy”. Goldman Sachs has a target of $485, Credit Suisse is at $500 JPMorgan Securities analyst Mark Moskowitz has a price target of $450 and Ticonderoga Securities leads the pack at $612.

Trying to find an analyst who thinks you should sell Apple stock is like trying to find a needle in a haystack.

written by Constantine Njeru \\ tags: Apple Stock Price, Credit Suisse, Goldman Sachs, Jpmorgan Securities, Mark Moskowitz, Needle In A Haystack, Securities Analyst, Stock Analyst, Stock Price Target, Ticonderoga

Facebook revenues in 2010 was near $2billion. Many facebook analysts are trying are trying to crunch the numbers and make a forecast for facebook revenues.  An interesting facebook revenue forecast comes from the writer, Adam Rifkin. In a techcrunch article, he shows the ways that Facebook’s annual revenues could grow from $2 billion to more than $30 billion in five years a diverse set of revenue streams.

The author shows different ways that Facebook will make money.

Facebook Ads

Facebook Credits

Facebook Search

Facebook Games

Facebook pages & Places

The article is not about the revenue streams Facebook has; it’s about the revenue streams they’re about to have.

Read the whole article at techcrunch

written by Constantine Njeru \\ tags: Adam Rifkin, Ads, Amp, Different Ways, Facebook, Money Search, Revenue Projection, Revenue Streams, Search Games, Search Pages, Writer Adam

Apple stock has been a high flier for the last 10 years. One anlayst thinks Apple stock could even soar to $600. Ticonderoga Securities thinks Apple’s stock could skyrocket north of $600.

This bold prediction was made after CNBC reported, Apple has just inked a Iphone deal with China mobile. Analyst prediction was based on the following facts:-

• China Mobile is the world’s largest wireless carrier, which has 611 million wireless subscribers.
• In the US, when Verizon got hold of the Iphone, we saw a rise in demand in Iphone. This trend could repeat in China
• Heavy option buying on Apple stock.

written by Constantine Njeru \\ tags: 10 Years, Apple Stock, Bold Prediction, Buying Stock, China Mobile, Cnbc, High Flier, Iphone, Nbsp, Soar, Ticonderoga, Verizon, Wireless Carrier, Wireless Subscribers

At $500 – 600 Google stock might seem expensive but if you look at Google fundamentals you may understand why 35 out of 38 Google analysts polled by Thomson Financial rate Google shares a Buy.

Google Stock Forecast : Google Stock prediction : Google stock outlook

One fundamental that makes a good case for Google stock to rise higher is data on internet advertising.

The nation’s top 100 advertisers direct just 5.5% of their total ad spending to the web, according to industry trade publication Advertising Age. Meanwhile, Internet advertising is expected to hit 9% of total ad spending by 2011, according to Jupiter Research, an industry research firm.

Paid search advertising, which is Google’s bread and butter, accounts for 40% of total ad spending on the Net and is the fastest growing category, helped by the fact that it’s both cost effective and highly scalable.

“Even at 40%, search has just barely scratched the surface,” Aggarwal says. “We think advertisers on a long-term basis are going to embrace search. Google, with the largest market share, is the biggest beneficiary of that growth.” Data Source: smartmoney.com article.

Although Google has been accused of being a one trick-pony that relies 99% on advertising, the above data shows Google core business of  search advertising is solid and the company will continue on the path of higher revenues, higher profits that translates to a higher stock price.

Facebook : The elephant in the room

Facebook is growing fast and attracting advertisers but i don’t think Facebook is a threat to Google business. Google is good at search advertising while Facebook is good at display advertising.

written by Constantine Njeru \\ tags: Advertisers, Advertising Age, Aggarwal, Amp, Bargain, Beneficiary, Bread And Butter, Core Business, Data Core, Data Source, Display Advertising, Facebook, Google, Google Google, Googles, Internet Advertising, Investing Stocks, Jupiter Research, Market Share, Nbsp, Profits, Search Advertising, Search Google, Shares, Show Business, Smartmoney, Stock Forecast, Stock Outlook, Stock Prediction, Stock Price, Term Basis, Thomson, Thomson Financial, Trade Publication, Trick Pony

Forecaster Harry Dent has made a big splash after he came out with a bold prediction that a Major Crash is around the corner.

Harry Dent Dow Forecast : Harry Dent Stock Market Forecast

Harry Dent has looked at his charts and predicts the Dow will trade as high as 13,200 by mid-summer 2011 and the S&P 500 as high as 1430, or more-than 7% above current levels.

“Then we could see another major crash,” Dent says, forecasting the Dow could trade as low as 3300 in a worst-case scenario. “Bubbles go back to where they started or a little lower,” he says. “The stock market bubble started at (Dow) 3800 in late 1994.”

Harry Dent Gold Forecast : Commodities Forecast : Oil Forecast

Dent predicts the Dow’s crash will play out over several years, he foresees present danger in gold, silver, oil and other commodities. “All investors should lighten up on or sell oil, silver, and gold as the U.S. dollar looks like it has bottomed and should rise ahead,” he writes in the March issue of HS Dent Forecast.

written by Constantine Njeru \\ tags: Amp, Bold Prediction, Bubbles, Crash, Dow, Forecast Forecaster, Gold Commodities, Harry Dent, Investment, Investors, Present Danger, Silver And Gold, Stock Forecast, Stock Market Bubble, Worst Case Scenario

Investment valuation in new age internet companies is soaring. Facebook is valued at $50 billion, Twitter is valued at $10 billion and Groupon is chasing a $25 Billion IPO. For some jittery investors it feels like 1999, and they are saying this  is a new tech bubble.

Is it really a Tech Bubble?

It feels like one. All bubbles, stock market, real estate, commodities e.t.c happen during a period of high liquidity. The more money flows into an asset class the higher the price of that asset rises.

In the tech bubble of 90s, the bubble got in gear when investment funds started raising money to invest in then technology companies. Just like then, we see Goldman Sachs e.t.c raising billions to invest in the new age technology companies. Source NYtime article.

Tech Bubble Prediction

When it comes to prediction, history is a good guide. In any bubble there are a few winners and many losers. In the tech bubble of 90s we saw Amazon, Yahoo & Ebay emerge while a string on losers Webavan, Akamai, Jupiter networks and many other were trashed in the dustbin of history.

Today, the bet is on internet companies with a competitive advantage (business model that cannot easily be copied) like Facebook & Twitter to emerge victorious. On the other hand companies like Groupon & others whose model can be easily copied might not make it.

The challenge for investors is picking winners. The situation is best summarized in NYTimes article:-

As cash continues to pile up, the fear is that all this money cannot be put to work responsibly. With only a few perceived “winners,” some investors must be choosing losers or paying too much.

 

written by Constantine Njeru \\ tags: Amazon, Asset Class, Competitive Advantage Business, Dustbin, Ebay, Facebook, Goldman Sachs, History Today, Internet Companies, Investment Funds, Investment Valuation, Jittery Investors, Liquidity, Losers, Money Flows, New Age Technology, Prediction History, Raising Money, Technology Companies, Twitter

Marc Faber is nick named ‘Doctor Doom’ He dishes out his market predictions and Forecast advice in his newsletter Gloom Boom & Doom Report.

Marc Faber is famous for predicting 1987 stock market crash. He advised his clients to get out of the stock market one week before the October 1987 crash.

Marc Faber Current Market Predictions & Forecast

1. US is going to go bankrupt – His current tag-line is: ‘buy a $100 US bond and frame it to teach your children about inflation by watching the US bond value diminish to almost nothing over the next 20 years’
2. As world population expand, food prices will continue to rise – Faber advises stock pickers to play on future food and water shortages by buying into companies with exposure to agriculture and water treatment technologies.
3. Commodities – Gold and other metals are still long term buys.
4. One of his most controversial forecast is imminent dirty war between US  and China over access to limited oil resources.

written by Constantine Njeru \\ tags: Bond Value, Boom, Commodities, Current Market, Dirty War, Doctor Doom, Food Prices, Future Food, Gloom, Inflation, Marc Faber, Market Predictions, Metals, Oil Resources, Stock Market Crash, Stock Pickers, Tag Line, Water Shortages, Water Treatment Technologies, World Population

An interesting item from 2011 Warren Buffet Shareholder letter was the forecast/ prediction that Coca-Cola could double its earning power in the next 10 years.

“In his 2011 shareholder letter,” he wrote, “we Berkshire Hathaway will almost certainly receive $376 million from Coke, up $24 million from last year. Within 10 years, I would expect that $376 million to double.”

That is an annual growth rate of between 6 – 7 %

If Coca-Cola doubles its earning power in the next 10 years as Warren Buffett predicts, then expect Coke stock to continue growing.

written by Constantine Njeru \\ tags: 10 Years, Berkshire Hathaway, Coca Cola, Coke, Earning Power, Stock Forecast, Stock Prediction, Warren Buffet Shareholder Letter, Warren Buffett