August 14, 2008
Solar stocks have been a big sector in the past year or so, although to be honest I have been out of the loop with them as they took off in the wake of rising oil prices and the increased emphasis on alternate forms of energy. That said, I started to take an interest in Timminco in April or May, I believe, when there were reports of a major short seller disputing a lot of the claims of the company. I’m not always quick to listen to the various talking heads that get quoted in media reports, but I’ve found a lot of short sellers do a lot more research about companies — obviously, publicizing their doubts would have helped them in their quest to profit, but there was enough there that I started to wonder myself.
Since then, Timminco appears to be not as pretty as people thought, with the head of the solar silicon division and the guy whose name is on their process patents, Rene Boisvert, claiming that people were overreacting by selling the stock (it dropped about 24% on Tuesday). For me, the best part of the article I linked is the reaction from a Sprott fund manager; Eric Sprott and co. were the biggest proponents of Timminco on its rise from penny stock to 2007’s stock market darling:
Yet even Timminco’s biggest backer, Sprott Asset Management Inc., is now taking some money off the table. At least one portfolio manager at the investment firm, which in May said it owned 17 per cent of Timminco’s stock, is reducing his position.
Fund manager Jean-François Tardif, who oversees three funds housed under the Sprott Opportunities Hedge Fund banner, says Timminco once made up 4 per cent of his portfolio but is now down to just 0.6 per cent after he sold the company’s shares in June and July.
“I sold most of my stuff on the way up and that’s my style,” Mr. Tardif said.
Perhaps something isn’t being conveyed in quotation, but how awesomely nonchalant is that quote? Isn’t this a tacit admission that he thinks the stock isn’t going to go up anymore? I mean, if you really believe in the future of this stock, with its talk of this super effective and cheap method to produce solar silicon from metallurgic-grade silicon, why would you sell off the bulk of your position? I mean, if the forecasts of Timminco are true, it would be worth a great deal more, no? To me, this signals a lack of faith and/or an ability to capitalize on hype.
Anyhow, I will continue to watch this stock and be entertained.
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Posted by Nelson Yee
February 3, 2008
Kara Swisher had an item about Mark Zuckerberg discussing Facebook (a private company) financials on a public dial-in number, and doing it pretty much on his own.
Revenue for Facebook for 2007 will be $150 million, as has been widely reported. But for 2008, Zuckerberg projected revenue to be increased to $300 million to $350 million.
More interesting was the news that Facebook would spend $200 million next year on capital expenditures, which is a whole lot of servers.
By the way, more expenses, noted chatty Mark, those employee levels would rise to more than 1,000 in 2008 from 450 now.
And Zuckerberg also said the company’s EBITDA–earnings before interest, taxes, depreciation and amortization and a number widely used by Wall Street as an indication of operating performance–would be $50 million in 2008.
That means the company would have a negative cash flow of about $150 million (EBITDA minus CapEx), rather than break even, as it does now.
But who’s counting? Zuckerberg apparently said he did not care about maintaining EBITDA anyway.
That’s because Facebook collected $300 million in investments recently from Microsoft and other investors, which pegged the valuation of the company at $15 billion.
Sounds like a guy with a lot of hubris — I’m sure if Facebook was a public company, they would have some ridiculous market capitalization (at least late last year). I wonder what full year income for 2007 was, that’s noticeably absent from this informal report. The mention of EBITDA for 2008 but no net earnings number is kind of suspect, too. I’m guessing this is another indicator that social networking, along with Google’s admission that it hasn’t turned into much of a revenue stream, is not something that will be very easy to milk. There’s something really unattractive about mixing social aspects with marketing and advertising so bluntly, sort of like that guy that all your friends call “the car salesman” and who’s completely ingenuine about his motives in his friendships. I think people’s natural distaste for that will keep this market a lot smaller than businesses expect — call it the social networking bubble. I’m curious to know what children who grow up in this ad-heavy online environment will think; I remember media classes in my high school where students were taught how to analyze commercials for their hidden aims and such — will kids of this era need such training or will most be skeptics? Will they be more susceptible and more accepting of this kind of marketing? One thing I find interesting in all the talk about the growth of online ad markets is that no one talks about AdBlock (the Firefox plug-in that prevents various advertising from being shown in-browser) and its amazing effectiveness. Perhaps, like GMail with it’s approximately 3% capture of the market, it’s something that seems like everyone should be using if you actually use it, but if you haven’t then you just stick to the status quo (i.e. Hotmail or browsing sites with garish banner ads sandwiched between paragraphs).
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Posted by Nelson Yee
February 1, 2008
Decent article about the Norwegian oil fund, which shows an amazing foresight and long-term discipline.
“Our politicians and voters have placed a bind on themselves, refusing to touch more than 4 per cent of the oil money, so what that means is their economy actually gets a stabilizing mechanism, which is built into the fact that the oil revenue doesn’t go into the economy, it flows out,” he explained. “So for the Norwegian people, the oil revenue is not revenue at all, it’s just wealth being moved into a more diversified portfolio for the future.”
(By comparison, Alberta’s Heritage Fund currently receives about one-eighth of the province’s oil money; the rest goes into provincial coffers or is paid directly to Alberta citizens. In its 31-year history, it has accumulated $16.1-billion, or $4,588 per Albertan. Two-thirds of it is invested inside Canada.) On the face of it, Norwegians seem to be paying a price for their frugality: Only about 10 per cent of Norway’s $70-billion government budget comes from oil money. In order to finance their generous state services and social benefits, Norwegians’ income taxes are among the highest in the world, and their gas stations charge $2.30 for a litre of unleaded – the highest price in the world, in a country that is the world’s third-largest exporter of the stuff.
But it’s hard to find Norwegians who consider this a burden. They have among the highest disposable incomes in the world (and the fairest distribution of income: Even the poor are comparatively rich). In every quality-of-life index, Norway ranks at or near the very top, above Canada. Their unemployment rate is currently 2 per cent. And in the 2005 election, Norwegians re-elected the social democratic coalition government that has shunted their earnings overseas.
Frankly, I’m neither well-versed enough in macro-economics nor do I know the details of the Norwegian economy and the fund enough to determine how the oil funds burgeoning wealth is indirectly pushed out to the economy. Obviously, as mentioned in the article, a fraction of it goes to the government economy, but I’m assuming there were some kind of stimulus programs funded by the oil wealth intended to grow other industries? So is the statement in the article that the fund never invests within Norway’s borders too literal? I guess it’s something I’ll look into.
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Posted by Nelson Yee
January 18, 2008
One thing always puzzles me about gold, old hedge against inflation and supposedly a storehouse of value since times of yore. Why? Are we still in an era where frightened or panicked people believe that gold is the last, best currency? If the world was riven again by wars and chaos, would having a few bars of the yellow stuff or a jewelry box full of gold chains make you some kind of king? If anything, the persistence of gold as some kind of “fundamental” currency seems to me driven by the same things that drive religious belief and, cough, technical analysis — and all the problematic areas that derive from human psychology. So the question is, do you play with that in mind? Or do you scoff at it and stay far away? I have a friend who owns some silver bricks and a nugget of gold who also believes numerous theories about September 11th and government surveillance, but ones that would make a skeptic scratch his head. Is he the kind of guy driving the gold rush?
At a practical level, gold isn’t even that useful a metal — copper by far exceeds it in terms of practical value and yet copper remains relatively unloved. Gold is a rare noble metal, to be sure, but so is platinum. (I found it interesting that gold can actually be synthesized, much like the alchemists hoped, from quicksilver (mercury) or platinum, although the spare nuclear reactor or particle accelerator required make the prospect of free and easy gold unlikely.) So why the importance placed on it? It must be historical. After all, it was about 100 years ago that people were heading for the hills, coming from all parts of the world for the pickings in California, Colorado, B.C. the Yukon and Alaska; we’re not so far removed from that mania. In fearful times, people go to their talismans, whether that be prayer or gold or magical thinking of many sorts — it’s a natural instinct, a sign that we are still animals at some deep level. Will we, in some future time, turn away from the metal, much as religion has decreased in stature in the past century? Or does the investor take this into account and try to surf the waves of human emotion that drive the gold market? I certainly keep my distance. But isn’t every market based on the weird mix of human emotion and perceived value of things? Certainly it’s difficult to apply classical value investing concepts to commodities (is there such a thing? How do you determine a commodity’s profitability?) but I suppose gold mining companies work much like software companies at a base level — after all, how do we determine the value of software, an even less tangible thing?
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Posted by Nelson Yee
February 26, 2007
The purchase of the privately held Standard Broadcasting by Astral Media announced over the weekend caught my attention, mostly because I had recently been invested in Astral for a short time around the time I owned Alliance Atlantis, buying some of the news about potential further consolidation in the Canadian media landscape. (Although, honestly, it was probably more likely that Astral would be the buyer in any deal — some speculated they’d buy Corus, but I had my doubts. As is usual, the buyer’s stock isn’t doing so hot this Monday morning, so I’m glad to have got out with a modest profit.) What with the planned merger of XM and Sirius Satellite Radio in the US (and its consequent fallout for their Canadian arms), the competition arena for radio shifts again.
It’s hard to say whether or not this Astral-Standard deal is really that much to be impressed by. Radio is fragmenting, and even with their new 81-station grip on the Canadian radio market (Corus Entertainment holding on to second with around 50-odd stations, I believe), it’s a little like that saying about exchanging deckchairs on the Titanic. Not that I think radio is dying, but with the surprising (to me) popularity of podcasts, streaming online radio, iPods and their own custom playlists and the sheer number of ways NOT to listen to the radio, I suppose it is somewhat impressive that radio, in either terrestrial or satellite form, is still alive and mostly kicking. With Google now in the radio ads realm (along with other players like Software Media Exchange and Bid4Spots) there are obviously some people who think radio will continue as a strong, stolid revenue source. It certainly won’t be a major growth industry (the attempted consolidation of satellite radio so quickly in that young industry, with its plateauing subscription numbers is an indicator of this) and I don’t know how practical it is to make bets on potential buyout targets, given that most of the public players have already bulked up considerably. Lately, I’ve been moving back to a more traditional value stance, and less about trying to exploit special situations, since these always seem much harder to call.
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Posted by Nelson Yee
January 24, 2007
This Wikipedia page on the Baby Bells that were created after the breakup of the original AT&T in 1984 is fascinating, from a business standpoint. There’s so much jockeying in the telecom industry, especially in the US, that it’s hard to keep track of who’s who, but I didn’t realize how many of the old names I’ve heard have been subsumed into these newer companies, names like NYNEX, Bell Atlantic and GTE that remind me of the old BBS days. If it weren’t for BCE’s misguided forays into publishing (web and print) and television (both production, as CTV, and distribution) under Jean Monty, they might actually be a serious competitor on the world stage and a potential investor in foreign telcos. Or maybe I’m just dreaming. Well, I guess they had that failed investment in Brazil, but they pulled out of there if I recall correctly. It still amazes me how big companies like that have so much inertia that they can continue operating, poorly, and just due to sheer size stay alive, like elephantine zombies. It’s often hard to tell if a company is actually still “living” — is GM, a nice short play for me in late 2005, in the midst of a legitimate turnaround? Or is it just in a slow-motion death spiral? That last link seemed prescient at the time, but lately seems a little bit like James Kunstler predicting a return to hard, rural living from imminent oil shocks while prices settle in the low-to-mid-$50s. (Interestingly, David Olive, one of the few business columnists I usually find truly insightful and not prone to punditry, seems to think $150 barrels of oil might be in the offing; I still don’t really feel that comfortable investing in oil due to the complexity of the environment surrounding it and felt kind of like a dilettante investing willy-nilly in oil sands stocks early last year and I’m not even sure a situation that induced an oil shock like that would be investable, anyhow, unless you were really good at getting out of every other sector that would suffer.)
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Posted by Nelson Yee
