Groupon’s $700 million IPO last week proved that thieves and lunatics, working hand in hand and impelled by naked greed, remain a dominant force in today’s markets. With America rapidly on its way to becoming Nickel-and-Dime Nation, perhaps those who snapped up 35 million Groupon shares at huge premiums on opening day knew what they were doing? We were reminded of Groupon’s visceral appeal this morning when we opened a G-mail from them promising $5 off the next Groupon purchase. Had we known this opportunity-of-a-lifetime would be sitting in our mailbox when we awoke, we would scarcely have slept the night before. Imagine what the company would be worth if it can sell just one $10 Groupon to each and every Chinaman. If and when that happens, and assuming the Chinese don’t rip off the idea first, Groupon at $28 per share may turn out to have been a steal. » Read the full article
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The stock looks primed to fall to at least 478.88, a Hidden Pivot, although the obviousness of a structural support at 473.02 from a key low made in late June could give us an edge for bottom-fishing. Most traders will be looking for a bullish turn from somewhere above 473, but the Hidden Pivot at 478.88 gives us a more precise tool for speculating on this. Accordingly, I’ll suggest buying two November 560 calls if and when the stock gets within 40 cents of the target. Thereafter, a stop-loss at 477.88 can be used until the stock turns around. It’s difficult to say exactly how much the calls, which closed yesterday at 11.50, will be selling for with the stock at or near our price. My guess would be as low as $7, but probably not less than that because the calls could pick up volatility (aka “juice”) on a sharp break lower in the stock. Assuming your execution is smooth, the stop-loss I’ve advised should subject you to risk, in theory, of no more than about 40 cents per contract. _____ UPDATE (October 5): The low of this week’s swoon came within less than $2 of our 478.88 target, but because of the magnitude of the hysterical short-squeeze that followed, we’ll set aside any thoughts of bottom-fishing as we’d originally planned. In the end, it was not the Hidden Pivot that turned the stock, but the mob’s expectations that June 24’s low at 473.02 would act as support. Because the support is so obvious, it seems all but certain that GOOG will test it.
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We wish Google all possible success in taking on playground bullies Apple and Microsoft in a battle that has crucial implications for the use of patents to stifle competition. Google’s $12.5 billion purchase of cell phone maker Motorola Mobility, its largest acquisition to date, is a shot across the bow of more established competitors who would seek to throttle the search engine giant’s cell phone development and other promising technologies by suing them to death in patent court. The Wall Street Journal recently detailed how high tech companies have been acquiring every patent they can get their hands on so that they stand a better chance of being predator rather than prey in patent litigation. Lawsuits over patents have become so ubiquitous that they are beginning to supersede innovation itself as the primary means through which high tech companies grow and prosper. In this respect, Google is the new kid on the block in head-to-head competition with firms like Microsoft and Apple that have been around since the 1980s. As a relative newcomer to the technology scene, the company’s war-chest of patents was practically empty until recently. » Read the full article
Where would you invest $76 billion if you had it? That’s the size of Apple’s cash hoard at the moment, and it would appear that they have no better idea of what to do with all that money than you or I. Apple isn’t the only company with this “problem,” if you could call having a mountain of spare cash in the bank a problem. According to Standard & Poor’s data reported by the Wall Street Journal the other day, the 500 largest U.S. companies alone currently hold cash or cash equivalents that totaled $963 billion at the end of the first quarter, up from $837 billion a year ago. Tech companies in particular are glutted with cash they apparently cannot use. Microsoft’s got $60.9 billion sitting around; Google, $39.1 billion; and Cisco, $43.4 billion. What’s a company to do? Traditionally, high-tech companies have shunned paying dividends because shareholders expect the companies to use the cash more aggressively for growth. But the likes of Apple and Google have been growing plenty fast without dipping into their so-called war chests. Come to think of it, maybe they should start a war with China, Europe or Brazil. Hasn’t war always been good for business? As for the excuse that they need to hold cash in case a great acquisition opportunity comes along, Apple, Google and numerous other NASDAQ world-beaters could borrow all they want for next to nothing, at any time. » Read the full article
If a millennial tide of Fed funny-money can push the broad stock averages higher no matter what the economic climate, just imagine what it can do for the shares of companies with strong earnings growth in these recessionary times. In particular, Google, IBM and Apple have soared in recent days on stellar Q2 reports and giddy rumors. Yesterday it was Big Blue that took flight, gapping up five percent on news of exceptional top-line growth. Even better for investors was that the company expects this growth to continue for at least the rest of 2011 in all of its lines: hardware, software and business services. We wrote here a long while back that IBM bonds were probably a safer and better bet than U.S. Treasurys, and we still think this is so. There were a few other blue chip companies on our short list that one could imagine will do pretty well even if economic activity in the U.S. sinks to depressionary levels. Johnson & Johnson, Disney, Caterpillar, 3M and Safeway come to mind, as well as Apple, which, despite its pricey merchandise, stands to rake in tens of billions of dollars over the years from nickel-and-dime sales of iTunes to an imponderably large number of music lovers. » Read the full article
Since bottoming on June 4, Google has generated the kind of impulse leg that could keep it buoyant for the rest of the summer. The rally exceeded no fewer than five “external” peaks on the daily chart without pausing for breath, a feat that will allow the stock to take its sweet old time consolidating the move in the days ahead. Let’s try to leg on a bullish butterfly spread by buying a call if and when Google falls to a Hidden Pivot support at 518.82. The target can be found on the 15-minute chart, where A=550.68 on July 7. Buy one September 600 call, using a stop-loss at 518. 20. Pay no more than the midpoint of the spread, since it is extremely wide. _______ UPDATE (9:16 p.m. EDT): Astounding! We thought that a $595 quote that flashed on our screen was an error. Evidently not. Earnings released after the close were so impressive that the stock is currently in the throes of a murderous short-squeeze to $600 — up nearly $70 over the day session close. So much for the call options we might have bought for around $6; they’ll be trading for at least $25 come morning.
Facebook IPO Hubris a Sad Commentary on America
by Rick Ackerman on February 7, 2012 7:42 am GMT · 58 comments
It’s a sad time for America when a firm that does what Facebook does is on track to become one of our largest companies. Based on capitalization, the web-based lubricator of social interaction could be in the top 50 within a few years, or even in the top 25 if analysts’ wildest expectations pan out. Facebook’s IPO promises to top Google’s $27 billion offering, reaping early backers a giant windfall. But wouldn’t it be far better if a company that actually made something were to enjoy such extravagant enthusiasm on Wall Street? Facebook of course makes nothing, and what it sells is of little economic value to anyone. And yet its founder, Mark Zuckerberg, is about to become one of the wealthiest men in the world. » Read the full article