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Starting January 2007, I have signed an agreement with www.eons.com to provide 26 exclusive articles per year. Please go to their website to view my most recent articles. Plus www.eons.com is a really cool web site!! Georges Yared
COACH'S ARTICLES----- Currently I have 8 articles written below for your reading pleasure.
Stop Losing Money Today: Issue Three "Progressive Gaming Corp.: A Beautiful Thing"
By Georges Yared November 14, 2006 In my book Stop Losing Money Today: The Art and Science of Investing, I used Progressive Gaming Corp. (PGIC) in several examples of when to buy, sell and when to buy more. Now the real thing is presenting itself to us...and it is a beautiful thing. PGIC is at $8.44 and we recommended it in our members section at $6.65 per share. Now, more than ever, this stock is a table pounding buy, even after it has moved up about 40%. The perfect storm is forming right in front of us. Let's examine it carefully. PGIC is a multi-product company focused in the gaming/entertainment sector. It is a global leader in integrated casino management systems. It has become the "go to" company. PGIC has innovative and unique technology for slot machines and table games of all types.. The slot machine products are server-based extending out to "dumb terminals" thus allowing for changes on the fly. The ITS, or Intelligent Table Systems, allows for a casino to better understand its customers habits and betting patterns. PGIC retro-fits a table game and outfits it with RFID-embedded betting chips. Both major business segments are recurring-revenue based, so PGIC earns money on the initial sale but also receives daily royalties. Very, very high margin business. The first and most important ingredient in any stock is senior management led by the Chief Executive Officer (CEO). The CEO of PGIC is Russell McMeekin. Russell is a brilliant, focused executive. He joined in August 2002 and found he had a lot of issues and situations that needed fixing. PGIC was primarily a hardware company draining cash and making lousy margins. He inherited a fat debt-load as well which he is bringing down. Russell decided the future of PGIC was based in a "software model" with a recurring revenue stream. He has re-positioned his company these past three years; has had to manage through growing pains and the laborious, time -consuming process of getting products approved by the various gaming commissions worldwide. Russell has managed to juggle all of these complex tasks near flawlessly. He has done an incredible job of managing Wall Street analysts and institutional portfolio managers as well, while re-engineering the company's business model, which has been no easy task. Russell has earned his stripes! PGIC is poised to begin serious profitability here in the 4th quarter of 2006 ( per company guidance, they will be EBITDA positive for the 4th Quarter) and all of 2007 and beyond. The pieces are in place and the internal investments in people, product and performance are completed as well. PGIC will finish calendar 2006 with revenues of about $75 million and an earnings per share (eps) loss of $.80. The numbers for 2007 become explosive with revenues expected in the $105-110 million range and eps of $.18-.20. The operating margin, the key, ultimate component to any investment, will approach 14% in 2007 from a negative 2006 number. The operating margin will go even higher in 2008 and should settle in the low 20's%. The best this company could have counted on for operating margins when it was hardware- based was 3-4%. Wall Street would have never paid attention to PGIC with these numbers. Russell McMeekin has elevated this company to be one of the most respected vendors in the gaming industry. Casino/gaming companies want and will pay for only the best technology. PGIC's customer base is the who's who of the casino world, MGM, Wynn Resorts, Crown Casinos, etc The price target for PGIC is $15-17 by year end 2007. As I mentioned, 2007 and beyond will see a continued growth rate of 40-45%. The market capitalization of PGIC is currently $315 million with the potential to exceed $1 billion. The story is just becoming known and you will see many brokerage firm research departments hop on the bandwagon. Like I said , the perfect storm is forming...
Stop Losing Money Today: Issue Two "Academia Meets Reality" By Georges Yared November 4, 2006 It is a classic case of academia meeting reality. You write about an investment concept, sounds great on paper, but now show me. Well, just so happens the perfect situation has presented itself and we can actually point to a real world example--a real world opportunity. I wrote in the book " Stop Losing Money Today" about when to buy more of a stock you fancy. What set of facts when presented would individual investors and professional portfolio managers take action and " double up" or at least buy more shares. As I said, reality hit yesterday. Aquantive (AQNT) fell 20% on Friday as the company released its 3rd quarter, September 30, 2006 results. The revenues came in at $111 million and the earnings per share (eps) were $.18. Both numbers were in-line with Wall Street analysts published expectations. No disappointment or failure, just what we fondly refer to as an "in-line quarter". So why was the stock knocked down 20%? AQNT has had a history, the last 7-8 quarters, of beating Wall Street analysts expectations. Revenues and EPS have consistently come in above the expected numbers. Yet, yesterday AQNT came in-line with 41% year-over-year growth, and providing excellent guidance for the 4th quarter ending December 31, 2006, as well as terrific 30% growth for all of calendar 2007. Revenues for calendar 2006 will be about $428 million and EPS of $.70, and for 2007, look for revenues of about $535 million and EPS of $.90, and all of these numbers are conservative. A smart company will never guide to the high end of expectations; they will give Wall Street a number they know can be easily achieved. Still does not explain why AQNT fell $5.97 on 8.6 million shares traded, 7 times its normal volume. What happened was "fast money" bought the stock 10-15 days in advance of the quarterly release. The fast money is normally hedge funds. They bought for the simple reason that AQNT's history was beating expectations, thus driving the stock price higher immediately, then fast money cashing out for a quick profit. Well AQNT had the audacity to announce only "in-line", and the "fast money" poured out of the stock in a New York minute. They inundated trading desks with huge sell orders and the result was a shellacking. Should I buy more? Absolutely. This story is as strong as ever with industry dynamics getting more and more pronounced. AQNT is the leader in website design, technology management and monitoring of these websites, and offering their customers a soup to nuts package of marketing and advertising programs on the internet. This company is by far the best and the leader in the space. So here in lies the opportunity for smart investors to add to their positions and sit tight with AQNT. Yesterday, $500 million of value was eviscerated from AQNT's $2.5 billion market capitalization. Why? Because they only reported an in-line quarter. The stock will base here for awhile( meaning trade quietly) as investors get their footing back, but the stock is a categorical buy. This is where opportunity meets reality and academia meets the real world.
Stop Losing Money Today: Issue One "Ready, Aim...Target" By Georges Yared October 31, 2006 After 28 years as a financial services coach probably the single biggest dilemma I have seen facing investors is when do I sell? How do I know if I should sell this stock? The old expression holds true: it's easy to buy, but really hard to sell. Selling a stock is sometimes the equivalent of parting with a loved one. What if I just hold on, it might go a bit higher; or, the stock is down, you are disappointed and even angry. That discussion ranges from "I should have known better" to " you've disappointed me so much". A sociologist client of mine once told me that scolding a down stock is like addressing a juvenile delinquent. Same painful language. So what do we do? Many professional portfolio managers will not buy a stock until they have determined in their minds a strict price target for selling it. Seems simple enough, but the art of investing is sticking to it.Emotions do enter the picture. By sticking to it I mean that as the stock approaches your price target; it is time to have a frank conversation with your broker/advisor. You have to pretend you do not own it. Would I be a buyer here at this new higher price if I didn't own a share? Have the underlying fundamentals of the company (stock) or the industry in which it competes changed at all? Is the growth rate intact, or accelerating? Has the senior management given any indication that their publicly stated goals for revenues and earnings changed at all? These are the hard questions that must be honestly asked, and more importantly, honestly answered. What you'll learn is that it's okay to keep the stock and raise your price target to higher levels. If the answers to the questions are lukewarm, then sell...and do not look back. I had a British portfolio manager client that managed a multi-billion dollar US stock growth fund who raised his price target on Cisco Systems 33 times before he ever sold one share. The key to his success was to re-validate the reasons and the fundamentals of his stock over and over again. It is a refreshing process as you eliminate all your emotions from a stock story and as Joe Friday would say " just the facts, please". The opposite action is also imperative if you wish to succeed as an investor. What is my downside protection price? If you buy a stock at $20, and it is now trading at $17, re-ask all the same questions all over again. Is it just a sloppy market? Are the fundamentals intact? Is senior management backing away from revenue and earnings projections? Has the growth rate begun to slow down? Would I be a buyer here if I did not own any shares? You get the idea. Amazing things happen to the overall performance of a portfolio when strict price targets are established, both for the upside and the downside. Your losses are minimized and your profits are maximized.
"When Did All This Happen?" By Georges Yared October 26, 2006 I was driving my son to his 8th grade semi-final football game a couple of days ago when it struck me like a bolt of lightning. Sitting at a red light, the car in front of me, the cars to my left and right, and the car behind me...were all Toyotas. I stopped to ponder this and wondered what are the odds of being stuck at a light and being surrounded by 4 Japanese cars, all from the same manufacturer? Thirty years ago, I would have taken the odds and placed the bet, but today, it is more common than we all probably realize. So, being a financial coach, I thought I should do some research and understand this phenomenon a little better. The facts I discovered are shocking to say the least, so fasten your seat belt and get ready for this... The stock market value (the market capitalization- all the shares of stock of a company multiplied by the current stock price) of Ford Motors(F) and General Motors (GM) COMBINED is $34 billion.. Seems like a pretty decent number, right? Pull that seat belt a little snugger...the stock market value of Toyota Motors (TM) is a staggering $193 billion!! Toyota Motors is worth 5 1/2 times the value of our two remaining American stalwarts COMBINED. 28 years in the investment business and I had no idea that it had gotten so out of control. The investing world has voted and Toyota is the overwhelming winner. So let's peel back this onion a little more: what gives here? What happened and when did this all occur? Toyota will complete its fiscal year 2007 on March 31, 2007, and its revenues will be about $196 billion, followed by March 31, 2008 at about $210 billion. The earnings per share (EPS) expectations for March 31, 2007 is $7.67 per share, and March 31, 2008, $8.45 per share. For a company of this massive size, 10% earnings growth is quite admirable. Shareholders equity at Toyota is $90 billion. All very impressive numbers. As for our two American companies, the news is not so good, and the overall income statement numbers are a bit depressing. GM's revenues for calendar 2006/2007 are expected to be $170 billion for both years. Flat revenues, no growth whatsoever. Ford's revenues for calendar 2006/2007 is also expected to be flat at $144 billion for both years. Ford will lose money this year and next, while GM is scheduled to be profitable for both years, but with negligible growth. GM and Ford are saddled with huge long term debt, $285 billion and $154 billion, respectively; and very low shareholders equity at about $14 billion each. So where do we go from here? Toyota is the leader in developing the hybrid line of autos, half combustible engine, half electric. Consumer surveys are showing great confidence in Toyota's leadership position with the Hybrids. The Camry is also the number one selling car in the United States; not the number one import--the number one seller period . Toyota's luxury line, Lexus, also leads the pack in customer satisfaction surveys and repeat buyers. Repeat buyers has been the strategy of Toyota since the 1970's. Smother the customers with service, decent pricing and quality and guess what? They come back for more. Toyota sells each car at a profit. Their operations are lean, efficient and cutting edge. Meanwhile, GM and Ford are hurting with exorbitant medical benefits costs to both their current workers and their retirees. Both companies have to play defense before they can play offense. Both have begun the painful exercise of plant closings, layoffs and extreme cost cutting. It is their only way out of the financial quagmire both are mired in. Both GM and Ford have been rumoured to be involved in merger discussions with several different European auto makers. It may be a necessary outcome for their survival. Both companies need a major cash rich, profitable partner to go the distance. I predict that in the next 3-5 years, GM and Ford employess will be speaking a foreign language just to get along with their new partners or owners. Anybody remember Chrysler? Well, we got to my son's game a little early...his team eeked out a victory. When we got back to our car to go out and celebrate (that's an ice cream treat for an 8th grader), guess what kind of cars were parked to my left and right? You guessed it....
Ah Yes, the Old "Where is the Next...?" By Georges Yared October 13, 2006 In my 28 years in the investment industry, whether advising professional portfolio managers , or serving as a financial coach to individual investors, the question always seems to come up-- where are and who are the next Microsoft's, Wal Mart's or General Electrics. Who has that better mousetrap that will captivate investors and take them on the 10-15 year ride? Well, I think I have identified 2 such companies and they are outright buys. The first one I have written about in an earlier article titled "Bigger Than McDonald's? Yes, Bigger than McDonald's", and that company is Starbucks, ticker symbol SBUX. Since I wrote that article about a month ago, the stock has moved up about $4 per share and Starbucks has communicated their ambitious plans to have a worldwide store base of 40,000 units, up from earlier plans of 30,000-35,000 units. I could write a book on the Starbucks mystique and their relentless pursuit of perfection. But, let's get to the second company. That company is Costco Wholesale Corp., ticker symbol is COST. They just reported their fiscal 4th quarter results ending August 31, 2006, and the quarter was $.75 per share versus expectations of $.72 per share. The 2006 fiscal year ended with earnings per share (EPS) of $2.30 with revenues at $58.9 billion. The expectations for August 31, 2007 are for revenues of $66 billion and EPS of $2.67-2.70, and fiscal year 2008, look for EPS at $3.10 and revenues of $74-75 billion. The market capitalization of Costco is just under $25 billion. Subscribers to www.georgesyared.com were advised to buy the stock earlier this week before the earnings were released. The stock has moved up $4 this week. Great, but where do we go from here? COST has the opportunity to be one of the two great companies that re-defines the retail space (along with Starbucks) over the next decade. If you have not been to a Costco store, go to one. I am not your usual type shopper, i am- a -get- me- in and get- me -out type shopper, except when it comes to Costco. My wife thinks I am nuts, but I love that place, have bought lots of unnecessary things and cannot wait to go back. I have happily paid my $100 membership fee for 3 consecutive years now. The experience is very worthwhile. COST has 480 no frills warehouses, mostly in the United States, where the selection and quality are superb. Whether its fresh produce, a huge choice of fresh meat and fish, furniture, books, electronics, groceries, clothes (nice clothes too) or vitamins, the prices are low and the quality is the best. Costco consistently beats Sam;s Club of Wal Mart month in and month out in same store sales comparisons. I actually did a "man on the street" interview at Costco earlier this week, unscientific, but the answers were consistent: people enjoy shopping at Costco, while Sam's Club customers (all 8 that I spoke too!!) said they were there for the quick in and out. People linger at a Costco, and because of the free samples available everywhere you turn and the wide selections. You buy tons of great and unique foods that you did not plan on. It's awesome and some would say, even addicting!! From the investment perspective, this $24.9 billion market capitalization company could become a $100-150 billion market cap company. They will add another 80+ warehouses in 2007-2008, and a total of 200-250 over the next 5 years. The average Costco does $130 million of volume, compared to Sam's Club average of $75 million. Costco has a loyal group of employees because they pay the best and offer proper benefits. Costco has their own signature private label brand of Kirkland. Kirkland maintains very high standards whether it be dog food all the way to vitamins. Costco is offering deals to its members on auto insurance and actual specials on automobiles. The home furnishing division offers high quality blinds, curtains and furniture. Costco does not cut corners on quality. They are lean and very efficient, and their employees are extremely motivated and helpful. Well investors, you asked about the next Starbucks and Costco...
"The Apple is Gold to the Core" By Georges Yared October 10, 2006 Apple Computer, ticker sysmbol AAPL could be one of the most fun stocks to own for the next 3-4 years. There are so many moving parts to the story and they are all moving in the right direction. The stock is at $73.81 and my price target is $105 within 12 months. Apple had a strong September sales month at their 150 retail stores as consumers were buying products for the back to school season. The beauty of Apple's retail store strategy is they control the customer from A to Z. You buy your iMac, or your iPod, and Apple is there ready to sell you every peripheral and maintenance agreements. Apple heavily promotes the iTunes on-line store to fill that iPod with your favorite songs. Apple will introduce sometime in the first half of 2007, the iPod with a cell phone feature. With an installed base of over 50 million units sold, Apple will become an instant major player in the cell phone market. Also, Apple will offer iTunes in a wireless fashion, increasing its own market penetration. Apple Computer's traditional customer base is the student, artistic and graphic designer/sound engineering markets. Apple is making inroads into the business/enterprise sector where they are competing with powerhouses Dell, Compaq and IBM. With the new iMac's sleek new look and features, any gains in the enterprise market will be pure gravy. Apple is experiencing strong demand for the notebooks and of course, the iPod. Christmas selling season will be robust and Apple has not experienced any component shortages, so their stores and on-line sales will be well stocked. The 2006 revenue and earnings per share expectations are $19.1 billion of revenues and earnings of $2.12 per share. Calendar year 2008 expectatios are conservatively set at revenues of $23.6 billion and earnings of $2.70-2.75 per share. Tremendous and sustainable growth. As I said, gold to the core. "Did Anyone Remember to Call Grandma?" By Georges Yared October 7, 2006 Back in mid June I was having coffee with a dear friend who regards me as his financial coach. He was relishing the fact that he convinced his grandmother to sell all her stocks and equity mutual funds and move entirely into cash and bond funds. I asked him why did he do that? " Oh come on man, get with it..oil is flying past $70 per barrel, gold is soaring past $600 an ounce and real estate is crashing all around us. The Democrats are gonna win everything, the House, the Senate...they are going to raise taxes, bail out of Iraq. There is no way the stock market can survive all this. To top it all off, Ben Bernacke, our new Fed Chairman is sticking it to us with higher interest rates. We are going to hell in a hand bag...I couldn't let my grandma suffer all this, so I got her into cash. Now, Georges as my financial investment coach, why aren't you giving me this same advice?" Would you believe I told him things are not as bad as they appear, and that we have seen this movie before? Well, I did, but I don't think he was listening, and I have to admit, after our meeting I began to question if I was missing something. Wow, June 2006, not a fun time folks. Oil going to $100, a gallon of gasoline $3, gold going to $1000 per ounce and interest rates clearly going up to at least 10%. Our President is not very popular either at home or abroad. Everybody out...let's bail and go into cash!! CNBC has all the naysayers and the "I told you so" experts on every hour. So what happened? Just like every other scary period, the stock market takes its licking and keeps on ticking. The calendar 2nd quarter corporate earnings report came out and they were pretty good. No major corporate blow ups. Okay, not bad, then what? Third quarter guidance for corporate earnings seemed in good shape, no one crying wolf...this stock market seems a bit cheap..maybe put a toe or two back in tha water. Wait a minute...oil down to $60 a barrel, a gallon of gas now about $2 at the pump, versus $3 just 3 months ago...inflation seems tamed, GDP growth doing just fine...Fed has met twice since June and no raising of rates, in fact talk now of lowering those interest rates. President Bush approval rating back up to the mid 40's%, maybe the November election is not a slam dunk for either party. Consumer confidence and spending seems to be ticking up. Retailers more optimistic about 3rd and 4th quarter expectations. What is going on here? We were crashing and burning 3 months ago ? What happened is the same thing that has happened these past 100 years. The US economy is built to grow. It will take hits from interest rates or international events...pick itself back up and keep on marching forward. The stock market is strong with the Dow Jones in new record territory, and professional money managers now spewing optimistically about the 4th quarter and 2007. The stock market for the year is up near double digits and corporate earnings seem healthy. I hope my friend remembered to call his grandma and get her back in the market.
"Baby Boomers and Eric Clapton: Wonderful Tonight" By Georges Yared Times they are a changin' and big time. Last night, September 16th, my wife and I celebrated our 18th wedding anniversary by attending the Eric Clapton concert in Minneapolis. Here was this 62 year old icon of 60's, 70's, 80's and 90's rock and roll, looking at an arena full of similar age fans. He was serene on stage often letting his two young, accompanying guitarists have the spotlight. By Georges Yared Who has the audacity to say that ... even think it? Nobody is bigger than McDonald's. After all didn't McDonald's change the way we Americans eat? Didn't fast food and drive-thru's become the norm? Didn't McDonald's capture the hearts and therefore, the appetite of every little kid with its Happy Meals and Ronald McDonald character? Didn't McDonald's even say that the world was ready for their menu and actually expand around the world? Even in France?!! "The Investment Climate Since 9/11" By Georges Yared We all remember exactly where we were on that fateful morning. Beautiful Tuesday morning in New York, September 11th began like any other autumn day: kids back in school, businesses trying to finish off the recession of 2001. |
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