Daily Investment Tips

Verizon finaly gots it’s hands on the Iphone, the big question is how the Iphone will impact on Verizon Revenues, profits and ultimately Verizon stock.

When Verizon reported their 2010 financial results, Verizon communications Executives projected revenue growth of between 4% and 8% in 2011, well above 2010′s 1.9%. They also estimate 11 million IPhone activations this year.

11 million iPhone activations is not peanuts, but keep in mind Verizon is spending near $4 – 5 Billion to subsidise the Iphone. That means the Iphone subsidy will eat into the profits.

Verizon stock prediction / forecast 2011

Verizon shares are currently trading 16 times 2011 forecast and historically the shares EPS has been 15. The stock now seems to be as high as it can get for 2011.

Expect the stock upside to happen, starting in 2012, because that is when the company will start showing the benefits of investing in Iphone. When announcing 2010 results, the company said it expected earnings-per-share growth in 2012 to about double 2011 number.

To quote Verizon executives thoughts on the future of the company “really explode over the next several years.”

written by Constantine Njeru \\ tags: Earnings Per Share, Financial Executives, Iphone, Iphone Activations, Peanuts, Profits, Quote, Share Growth, Stock Forecast, Stock Prediction, Stock Shares, Subsidy, Verizon, Verizon Communications, Verizon Stock, Year 11

I was reading CNET and they had an article that analysed the amount of money Apple Inc makes on each Iphone. The analysis was by T. Michael Walkley of investment firm Canaccord Genuity.

Apple sees a gross margin of 50 percent and operating margins of around 30 percent on its iPhone. That’s within an industry where most handset makers struggle to turn a profit, or reach operating margins of even 10 percent.

As a result, he said, Apple took home 39 percent of the mobile phone industry’s overall profits by selling around 17 million iPhones during the first half of 2010.From CNET article

Apple Analyst Revenue forecast for 2011 to 2012

Walkley is forecasting sales of $63 billion for Apple in fiscal 2010, $82 billion in 2011, and $93 billion in 2012. That compares with $42 billion in 2009.

written by Constantine Njeru \\ tags: Amount Of Money, Cnet, Gross Margin, Handset Makers, Investment Firm, Iphone, Iphones, Michael Apple, Mobile Phone Industry, Operating Margins, Profit Margins, Profits, Walkley

For investors who had the courage to buy Apple stock back in 1997 when Steve Jobs made a return, they have had a ride of their life. Back in 199os Apple stock was trading in the single digits, there was talk of bankruptcy and Michael Dell famously said he thought the company should just be broken up and the money divided among shareholders, but today Apple stock is in the $250s range.What a ride!

Can Apple stock continue rising? Some investors think Apple stock best days are behind it but some investors believe Apple stock rise is just starting and that Apple will continue blowing past expectations.

Four Reasons Why Apply Stock may continue rising

MSNBC has an interesting article as to why investors should invest in Apple.The factors driving Apple are software, design, ecosystem and underrated market.

Apple will become the most valuable company in the world. Bet on it. In fact, go out and sell all your personal belongings, liquidate your 401(k), and buy Apple stock with every last dollar you own.

OK … on second thought, I wouldn’t advise that — it’s a bit rash. But there are ample reasons to believe that the company’s rise is just starting and that Apple will continue blowing past expectations.

The author of the article shows a scenario forecasting/predicting  how Apple revenues and profits will look like in 2014.

Read the full article at MSNBC

written by Constantine Njeru \\ tags: Apple Software, Apple Stock, Bankruptcy, Bet, Courage, Digits, Ecosystem, Last Dollar, Michael Dell, Msnbc, Personal Belongings, Profits, Rash, Second Thought, Shareholders, Software Design, Steve Jobs, Stock Prediction, Stock Rise, Stock Trading

I have always heard that football is big business. Alot of money is flowing into football clubs in terms of Television rights and sponsorship. Then I came across the following question:-

Q: How do you make a small fortune investing in football?

A: Start with a large fortune.

It would be a ridiculous idea to invest your money in football if you are looking to make a profit. The model is a failure as even success can’t guarantee profitability. Just look at the financial books of the so called successful football clubs, Liverpool, Manchester united, Real Madrid, Barcelona, & AC Milan. The profits are not there, players’ salary is ridiculous and cost of running the business is too high to be profitable. Even for clubs that report abook profit, deduct interest payments + annual loan payments and the club is money loser

People making Money In Football

The happiest people in football are the banks. They are making millions in interest payments. Another group making money is any Pay TV company that a significant monopoly on rights.

If you want a piece of football money maybe you should be looking into bank shares or Pay T.V. shares.

written by Constantine Njeru \\ tags: Ac Milan, Alot Of Money, Amp Ac, Banks, Financial Books, Football Clubs, Interest Payments, Liverpool, Loan Payments, Manchester United, Money Loser, Monopoly, Pay Tv, Profitability, Profits, Real Madrid Barcelona, Ridiculous Idea, Salary, Small Fortune, Sponsorship, Television Rights, Tv Company

If you are asking the question whether this is a good time to invest in the stock market? Then read the following investing check list that will guide you to answer that question.

Are you young?

If you are in your 20s this is the best time to start investing in the stock market. Young investor have the advantage of time. The more time you have the more money you can invest over time.

Do you have the capital?

Most investors reason you should start investing immediately you have the capital. If you you keep the money in the bank you run the risk of spending the money.

The Price Earning Ratio.

Is the the Price earning ratio at historical low. A low P.E is a sign of a bargain more so if the company earnings are projected to remain stable.

Governement stimulus

Government stimulus have a habit of giving an economy a big kick. All that government money goes into the hands of consumers, who spend the money in making purchases. That consumer demand boosts companies revenue and profits. Higher profits translates to higher share prices.

Market Psychology

The best investor to explain this concept is Warren Buffet in the following quote

“Be fearful when everyone is greedy and greedy when everyone is scared”

written by Constantine Njeru \\ tags: Bargain, Best Time, Boosts, Company Earnings, Consumers, Good Time, Government Money, Habit, Invest Stock, Investing In The Stock Market, Investing Stock, Investor Advantage, Market Psychology, Money In The Bank, Price Earning Ratio, Profits, Share Prices, Stimulus, Warren Buffet, Young Investor

Stephen Schwarzman of Blackstone group, a private equity firm. Schwarzman co-founded Blackstone Blackstone in 1985, with $400,000 seed capital. As of today Blackstone group has a market capital of over $38 Billion.

How has Stephen Schwarzman made so much money? DEBT!

Stephen Schwarzman strategy of making money is to is to use other peoples money to buy companies.

The following is a standard, textbook example that Stephen Schwarzman has designed to perfection:-

Suppose a company makes an annual profit of 10 million USD and is acquired by a private equity firm for 100 million USD, that is, at a price earnings ratio of 10, meaning that the private equity firm is willing to pay 10 times the company’s annual profit. To acquire the company the private equity firm invests 30 million USD of its own capital borrowing the remaining 70 million USD.

Now suppose that three years later the company still makes a profit of 10 million USD per year. The private equity firm has used the profits to repay 30 million USD of the loan (I’m abstracting from taxes here) and decides to sell the company for the same price as it has bought it, that is, 100 million USD. This may seem like a bad deal, but take a closer look at what happens. The private equity firm uses 40 million USD to repay the remainder of the loan and is left with 60 million USD. Thus, in three years the firm has doubled its initial investment of 30 million USD!

If the private equity firm manages to reduce costs and increase the company’s annual profits to 16 million USD, to keep things simple, and sells it again with a price earnings ratio of 10, that is, for 160 million USD, the profit for the private equity firm is 90 million USD (after repaying the 70 million USD loan), three times the initial investment. If, because of the increase in profits, it can convince buyers of a higher price earnings ratio, it will earn even more.

So, in this simplified example, regardless of whether the company being acquired is “turned around”, the private equity firm makes a substantial profit on its investment. The reason? Its ability to finance part of acquisition with debt.

Source Courtesy of Ivar Hagendoorn private equity

written by Constantine Njeru \\ tags: 10 Million, 100 Million, 30 Million, 60 Million, Blackstone Group, Closer Look, Initial Investment, Investment Group, Investment Strategy, Making Money, Money Debt, Much Money, Price Earnings Ratio, Private Equity Firm, Profits, Remainder, Seed Capital, Stephen Schwarzman, Textbook Example, Three Times

George Soros is known as “the Man Who Broke the Bank of England” after he made a reported $1 billion during the 1992 UK currency crisis. He bet against the British pound and won big.

I came across a quote by George Soros, that seems to give an easy answer as to how the famous speculator makes money in a turbulent world.

The financial markets generally are unpredictable. So that one has to have different scenarios… The idea that you can actually predict what’s going to happen contradicts my way of looking at the market.

George Soros

It is clear what George Soros does, He evaluates multiple scenarios and takes position in each scenario. As the market unfolds he lets profits run on the correct scenario and cuts losses on wrong scenarios. At a single time he might be long on a position but still take a short position on the same.

To play this scenario game you need to use risk management tools such as options, futures and short sales.  For this kind of trading to be successful an investor needs to have sufficient capital to buy those tools.

written by Constantine Njeru \\ tags: 1 Billion, Bank Of England, British Pound, Currency Crisis, Economic Predictions, Financial Markets, George Soros, Investor, Losses, Money, Options Futures, Profits, Quote, Risk Management Tools, Scenario Game, Scenarios, Short Position, Speculator, Turbulent World, Uk Currency