Forget Facebook, Splunk is 2012′s Hottest IPO

April 19th, 2012

A month ago, I told you to add Splunk (Nasdaq: SPLK) to your “Hot IPO Watch List.”
You’ll recall, the company’s capitalizing on one of the most compelling growth trends in the market.

Specifically, the exploding amount of data we create as a society, known as Big Data, which I alerted you to in early December.

Well, the day of reckoning is upon us. Shares begin trading today. “Big deal,” you say? It is, in fact.

Before long, I expect the company to become a household name and a staple in most investors’ portfolios. And ultimately, its IPO should prove to be the hottest of 2012. Yes, even hotter than Facebook’s IPO. And here’s why…

Forget Facebook, Friend This IPO Instead
There’s no doubt Facebook’s IPO is going to make the company’s geeky founder, Mark Zuckerberg, a billionaire many times over. Almost instantly. But the same guarantee can’t be made for lowly retail investors in Facebook’s IPO. I say that because Facebook doesn’t deliver a meaningful, or even necessary, service. We can all live without it. (Trust me, we can.)

And it certainly doesn’t help its users derive any economic benefit. Instead, it tries to derive an economic benefit from its users through advertising. I got news for you, folks. Advertising has been around for centuries. Sure, Facebook represents a new wrinkle on advertising. But it’s not going to change the world or the way we conduct business. That, my friends, is what makes Splunk different. It is a game changer.

Splunk’s software provides companies with real-time business intelligence. And it does so by collecting a company’s data and indexing it on a massive scale, regardless of format or source. Its technology allows companies to search, correlate, analyze, monitor and run reports on this data. All in real time.
Simply put, Splunk is the Google (Nasdaq: GOOG) for the business world. Just like we can’t live without

Google, businesses are learning they can’t live without Splunk, either.
Case in point: More than 3,700 customers, including over half of the Fortune 100, are now using Splunk’s software.

I know. The same amount of companies (if not more) probably uses Facebook. But that’s only because of peer pressure – “Everyone else is on Facebook, so we should be, too.”
To date, though, no company has materially changed its business by simply being on and/or advertising on Facebook.

The difference with Splunk is that companies are actually monetarily benefiting from it.
Consider:

• After suffering website downtime for six straight holiday seasons, Macy’s (NYSE: M) started using Splunk. And it experienced zero downtime in 2009 and 2010. The result? It avoided revenue loss of $300,000 per incident.

• Splunk’s software helped MetroPCS (NYSE: PCS) optimize call routing. The result? A savings of more than $1 million per year. Not bad for a software that can be implemented for as little as $10,000 to $30,000.

• Expedia (Nasdaq: EXPE) estimates that its use of Splunk to reduce downtime, optimize marketing and conduct deep web analytics has delivered an annual return on investment (ROI) of over $10 million.

Like I said, Splunk helps companies derive a real economic benefit. And that’s much more valuable than amassing a legion of Facebook friends, who’ll likely never put a single penny in the company’s coffers.

Good for Business, Good for Investors, Too
The reason Splunk’s so compelling from an investment standpoint is two-fold…
First, it sells a product that sells itself. I mean, what business doesn’t want to use the data it’s already collecting to improve results. Mind you, there are a lot of potential sales out there, too. Remember, Splunk’s software serves a market worth at least $32 billion, according to Gartner.
Second, Splunk boasts a unique business model with significant leverage.

While most enterprise software is sold via licenses based on the number of servers or users, Splunk charges customers based on the amount of data they index per day.

So the more data Splunk’s software processes, the more sales the company books. And like I told you before, nobody is predicting a slowdown in the amount of data being produced by businesses.
The good news is a sizeable chunk of Splunk’s sales are destined to drop to the bottom line. The company’s gross margins check-in at an unheard of 90.4%. For comparison’s sake, Facebook boasts gross margins of just 47.3%.

Only If the Price is Right
Given Splunk’s enviable fundamentals, one critical question remains: How much are shares worth?
Underwriters originally planned to price the IPO between $8 and $10 per share. But in a sign of brisk demand, they raised the range to $11 to $13 per share on Monday.

When shares begin trading today, I assure you they won’t be that cheap. So how much should we be willing to pay?



If we use price-to-sales ratios for other enterprise software companies as a proxy, we arrive at a valuation of up to $12.16 per share. That suggests shares will be fully valued based on the pricing range.

If we use recent takeovers in the industry – which is justified since Oracle (Nasdaq: ORCL) and Dell (Nasdaq: DELL) were both reportedly trying to buy Splunk – we arrive at a valuation range of up to $16 per share. That’s still low.

Does that mean we should just pass on Splunk? No!

We need to take into consideration that these estimates are based on a snapshot in time. And Splunk’s business is going to look a lot different one quarter and one year from now. Not to mention, Splunk deserves to trade at a premium since it’s increasing sales at a much faster clip than every other company.

So let’s assume Splunk grows sales by 50% in 2012. That’s not a stretch since the company’s grown sales at a compound annual rate of 91% since 2008. And let’s assume the price-to-sales multiples remain the same. If we do that, Splunk is worth up to $23.50 per share based on my estimates. Bottom line: We need to leave some room for us to profit, so I’d be a buyer of Splunk up to $20 per share.

Ahead of the tape,
Louis Basenese for Wall Street Daily
www.wallstreetdaily.com
Source: http://www.wallstreetdaily.com/2012/04/19/2012s-hottest-ipo/

Google Takes a Cue From Apple

April 18th, 2012

It looks like Google (Nasdaq: GOOG) followed my advice to keep Motorola Mobility’s (NYSE: MMI) smartphone business.

Business Insider says, “According to a person briefed on Google’s plans for the merger: While Google may have originally wanted to buy Motorola for its patents only, it has come to realize that it wants to follow Apple’s lead when it comes to smartphone and tablet computer development.”
You see, currently, Google simply designs the Android software and depends on other companies like  

Samsung and HTC (TPE: 2498) to integrate the operating system into a smartphone.
And while some amazing devices have been developed under this model, the Android experience isn’t as unified as what you’d find on Apple’s (Nasdaq: AAPL) iPhone. By designing the phone from the bottom up, however, Google could finally bring an Android phone to the market that’s just as intuitive as Apple’s smartphone on every level.

But people aren’t exactly jumping for joy over the prospects of such a move, as it runs the risk of alienating Google’s Android partners.

However, I’m still convinced that the popularity of a vertically designed Android device would light a fire under other manufacturers to develop killer smartphones to compete.
And this shouldn’t be a problem, considering CEO, Larry Page, made it clear that Google has no intention of leaving its loyal Android allies in the dark.
With the Motorola acquisition close to final approval, though, here’s why Google needs to stick to that promise…

Google’s Walking a Dangerous But Profitable Line
Some reports indicate that device makers are put off by the purchase of Motorola. And if Google ends up designing its own device, it would lead the manufacturers to overhaul the Android operating system to make it their own.

The idea is that this process, known as “forking,” would allow a hardware manufacturer to create an entirely unique experience (because it barely resembles the original Android operating system). And this differentiation could help its devices stand out from the crowd. The problem, however, is that going rogue means that the company won’t be able to implement key Google applications, like Gmail, Maps and the Google Play app market. So it creates more work for the hardware maker.

But that problem would be even worse for Google. You see, Google cashes in on applications through mobile advertising and in-app purchases. If hardware makers design their own app store alternatives, this would cut deep into Google’s bottom line. Like Bloomberg says, “Mobile advertising is one of Google’s fastest-growing markets, with industry-wide revenue projected to rise to $20.6 billion in 2015 from $3.3 billion in 2010, according to Gartner Inc. With online traffic increasingly coming through apps instead of mobile browsers, Google’s push to wring mobile ad revenue from Android could be impeded.”

Amazon’s (Nasdaq: AMZN) already shown that such a model can hurt Google with the Kindle Fire tablet. Fire owners must purchase applications through the Amazon Appstore, instead of the Google Play Store.
And a study last month by Flurry shows that developers are making more money through in-app purchases with Amazon’s marketplace than with Google’s. In January and February, for every dollar of revenue a developer made through Apple’s App Store, for instance, he made $0.89 through Amazon and $0.23 through Google. (We’re not exactly surprised, by the way, given that we pointed out a few reasons why Amazon’s app marketplace is superior to Google’s.)

Problematically for Google, Amazon’s success with forking could entice current Android partners to follow in its footsteps. Meaning Google better tread carefully as it continues along this path of exploring hardware options, keeping its Android partners in the loop the whole way.
Bottom line: Although mirroring Apple’s vertical integration strategy should boost Android’s popularity enough to where losing a smaller phone maker shouldn’t be a huge deal, losing a partner like Samsung, on the other hand, could punch a huge whole in Google’s mobile revenue.

Good investing,
Justin Fritz for the Wall Street Daily
www.wallstreetdaily.com
Source: http://www.wallstreetdaily.com/2012/04/18/google-takes-a-cue-from-apple-goog-aapl/

Apple Watch: 3 downtrend signals for NASDAQ:AAPL

Republished April 24th, 2012
Originally Published Tuesday, April 11th, 2012

The Tech Investor: Apple's recent dip and downtrend (still) doesn't represent a buying opportunity. So we would be looking elsewhere to trade apple stock. However, a long-term perspective dictates that once this stock is oversold and all the bad news is priced in, then it could be a buying opportunity. The reality is that apple is positioned to most likely become the world's first trillion dollar stock, and will eventually trade at $1,000.

We all know that Apple’s (Nasdaq: AAPL) stock has been blasting off like a rocket. Since it reported insane profits last quarter at $13.06 billion, shares jumped over 50% in less than three months’ time.
Even with this explosion in share prices, however, many analysts argue that Apple’s stock is actually undervalued. 

In fact, earlier this month, Brian White of Topeka Capital Markets claimed that shares are actually worth over $1,000, which would represent a 60% leap over today’s prices.
His estimate is already being put to the test, however, with shares taking their sharpest plunge this year – down 9% in just a week. Let’s take a look at three factors that are likely contributing to the downward momentum, and, more importantly, why you shouldn’t consider the recent dip a buying opportunity.

~ AAPL Downtrend Factor #1: iBooks Attracts a Lawsuit
According to Bloomberg, “Revenue from e-books doubled last year to $1.9 billion.” And Apple’s a growing player in the space with 10% of U.S. marketshare.
The U.S. Department of Justice has filed a lawsuit against five publishers, as well as Apple, for allegedly conspiring to fix e-book prices, ultimately leading to higher prices for consumers. Three publishers have already settled, but Apple and two publishers are willing to duke it out in court.
Apple claims that it negotiated with each publisher on terms and e-book pricing separately. But any evidence to the contrary could compromise the company’s future revenue in the space.

~ AAPL Downtrend Factor #2: Apple Security Comes Under Fire
Malicious software called “Flashback,” which disguises itself as an update for Adobe Flash Player, has recently been spotted on upwards of 600,000 Macs. And new malware known as “SabPub” has been detected over the weekend.

The company’s been catching heat for the security threats, mostly because there’ve been virtually zero threats to its computers, unlike Microsoft (Nasdaq: MSFT) Windows PCs. Like Computerworld says, “The only reason this story got the attention it did is because for more than a decade Mac OS X has not been hit hard with any major malware threat.”
Still, since this essentially proves that Apple devices aren’t as bulletproof as some consumers like to believe, investors are realizing that this could take a bite out of Apple’s computer sales.

~ AAPL Downtrend Factor #3: Subsidies Going Out the Window?
With the actual cost of the iPhone around $600, we have carrier subsidies to thank for the much more affordable $199 price tag. As you likely know, carriers like Verizon (NYSE: VZ) and AT&T (NYSE: T) foot the majority of the bill for these high-priced gadgets, and make up for that cost by charging you more for their services month to month.

That’s part of the reason why Apple has been able to snatch 29.6% of the smartphone marketshare in the United States. In other parts of the world, however – where carriers refuse to subsidize the iPhone – Apple’s marketshare is lagging behind. In Portugal, for instance, consumers must pay full price for the phone and Apple claims just 9% of the market.

U.S. mobile networks might be joining them, though, considering it could boost short-term profits and result in more attractive monthly plans for consumers. Such a shift in subsidy priority would certainly put a strain on Apple’s mobile business. As Casey Research analyst, Robert Ross, says, “Seeing as Danish telecom  

Telenor ASA (OTC: TELNY) stopped subsidizing phones in lieu of offering lower monthly rates last year, other European – and maybe even American – carriers may soon follow suit.”

Think Twice Before Buying Apple Stock
Now, even if the developments above only cause short-term, kneejerk reactions among investors, that doesn’t mean you should consider the recent pullback in Apple’s share price as a buying opportunity.
Undervalued or not, there are better ways to invest that could churn out faster gains in the months ahead.
As Wall Street Daily’s Chief Investment Strategist, Louis Basenese, pointed out to me this morning…
“If Apple’s ascent continues unchecked, it will be worth more than the market cap of all the publicly traded companies in Spain, Portugal and Greece combined! That alone should be a reason to pause when considering putting new money to work in the stock.

“If I had $50,000 to invest today, I’d rather bet on the thousands of companies in those down-trodden European nations (via ETFs) over putting all that money into Apple. No one can argue my downside would be much more limited, while my upside would be almost unlimited.”

Take heed.
Good investing,
Justin Fritz
http://www.wallstreetdaily.com
source: http://www.wallstreetdaily.com/2012/04/17/apples-dip-doesnt-signal-buying-opportunity-aapl/

Apple Watch: To Buy or Short Apple, that is the question

Tue, Apr 24th, 2012   

By Louis Basenese for Wall Street Daily
http://www.wallstreetdaily.com

Are you ready? The biggest earnings announcement of the week hits after the bell today.
I’m talking about none other than Apple’s (Nasdaq: AAPL), the world’s largest company and the market’s most widely held stock. Analysts expect Apple to report a 56% increase in quarterly profits to $9.96 per share. And sales are expected to jump 49% to $36.7 billion, according to Bloomberg data.
Of course, expectations mean nothing when it comes to Apple.

As The Wall Street Journal puts it, “The company has a history of under-predicting and blowing out the Street.” That’s no exaggeration, either. Take last quarter, for instance. Apple topped profit expectations by a whopping 36.5%. Meanwhile, the average company in the S&P 500 Index only beat expectations by 3.7%.
And over the last 25 quarters, Apple’s only missed earnings expectations once, according to Bespoke Investment Group.

Given its history of surprising so strongly to the upside – and the stock’s 11% pullback from its intraday high on April 10 – does that mean today represents a last-minute buying opportunity?
I wouldn’t be so quick to pull the trigger. Here’s why…

Even Apple Can’t Defy the Golden Rule
In the 17th century, Swiss mathematician, Jacob Bernoulli, proved that a variable reverts to a mean over a large sample of results. Applied to stocks, Bernoulli’s Law means that a company experiencing high earnings growth and a rapid rise in share price is destined to experience a slowdown, as the company grows ever larger. Don’t believe it? Consider the track record of these previous titleholders of “The World’s Largest Company”…

• In March 2000, Cisco Systems (Nasdaq: CSCO) hit a market capitalization of $557 billion. Fast-forward to today and its market cap is just $106 billion.

• In early 2002, Microsoft (Nasdaq: MSFT) ruled the world with a market cap of $276 billion. Today, it stands at $270 billion. So not counting dividends, shares have essentially treaded water for a decade.

• In 2005, General Electric (NYSE: GE) earned the top spot with a market cap of $370 billion. Now its market cap is $202 billion.

• And at the end of 2006, Exxon Mobil (NYSE: XOM) earned the title of the world’s largest company with a market cap of $447 billion. Today, its market cap is down to $402 billion.

Even a recent analysis by Eric Swarts of Market Anthropology underscores the unfortunate fate of the world’s largest companies. He found the companies “certainly did not go bust… Their valuations simply matured and loss the enormous momentum drive that propelled them to unsustainable growth trajectories.”
So betting on Apple now is betting it will be an exception. In other words, the odds aren’t in our favor. Especially when you start to dig into the actual numbers.

At its current size, Apple is almost worth the same as the roughly 500 publicly traded companies in Spain, Portugal and Greece, combined. As of April 10, the company’s market cap stood at $586 billion versus $590 billion for the debt-laden European countries, according to Bloomberg.



If Apple’s share price rallies an average of 46.6% per year for the next decade – like it did over the last 10 years – its market cap would balloon to $24 trillion by 2022. That would roughly be equivalent to the size of the entire U.S. and Chinese economies in 2011, combined!
As Robert Chira, an analyst at Evercore Partners, says, “If you extrapolate far enough out into the future, to sustain that growth Apple would have to sell an iPhone to every man, woman, child, animal and rock on the planet.”

That’s not likely. So neither is it likely that Apple’s stock price is going to keep charging higher, unabated. Especially in light of the other red flag the market’s waving…

Apple: Not a Buy At Any Price
Normally, companies that are growing at a faster clip than what’s average command a premium valuation. Apple definitely qualifies. In 2011, it increased sales and earnings by 68% and 96%, respectively.
The only problem? The stock’s not trading at a premium to the market. It’s trading at a discount.
At current prices, Apple trades for about 11.5 times forward earnings. That compares to 13.8 times for the S&P 500 Index, according to Morningstar.com.

Of course, analysts are trumpeting the fact shares are “cheap” as a justification for standing behind their “Buy” ratings. To me, though, the valuation disconnect is an obvious warning sign.

One Miss Away From the Gutter
It’d be unfair to label Apple a one-hit wonder. Even if its introduction of the iPhone stands alone as “arguably the single most important technological advance so far in the 21st century,” in the words of The New York Times.

But it’s perfectly fair to label the company a two-hit wonder. Without the iPhone and the iPad, Apple is irrelevant.

The two products now account for about 65% of revenue. And without them, Apple’s impressive sales growth of 16%, 56% and 69% in fiscal 2009, 2010 and 2011 plummets to -3%, 12% and 8%, respectively.



My point? If Apple doesn’t continue to introduce new product categories – and instantly dominate the market – its stock is destined to fail. It can’t keep growing at its current breakneck pace on the backs of the iPhone and iPad alone.

I’m sure the visionary Steve Jobs left the company locked and loaded with a few ideas before his premature death. Buying Apple now, though, is a bet that the new CEO, Tim Cook, can execute on those ideas… and that he can come up with a few more of his own.

Bottom line: Wall Street is head over heels in love with Apple. Out of 56 analysts covering the stock, only one rates it a “Sell.” But the contrarian in me views such universal enthusiasm as a warning sign.
Add in the track record of previous holders of the title of “The World’s Largest Company” and it only solidifies my conviction. An investment in Apple right now carries much more downside risk than upside reward potential.

Source: http://www.wallstreetdaily.com/2012/04/24/is-apple-really-a-buy/

What's Next for Apple (NASDAQ:AAPL)?

April 23, 2012

By William Patalon III, Executive Editor, Money Morning

The recent sell-off we've seen in Apple Inc. (Nasdaq: AAPL) shares came as a real stunner to Wall Street.

But Strike Force Editor Keith Fitz-Gerald saw the sell-off coming.

In fact, he predicted it.

Back on March 27, Keith wrote a lead story for Money Morning in which he articulated seven very clear reasons that investors should consider shorting Apple's stock.

And that was a couple of weeks after he detailed a "put" option strategy - in essence, a "short" trade - that resulted in a 47% profit (in just two days, no less) for the subscribers of his Strike Force trading service who followed his recommendation (a short-term reversal delivered those gains).

I wanted to know what tipped him off that a reversal was coming - as well as what he was predicting for Apple's shares going forward.

"BP, it was clear to me that this kind of reversal was coming - and sooner rather than later," Keith said during a private briefing late last week. "The shares had soared 75% in just five months - one analyst actually described the performance as "euphoric.' Suddenly, we're seeing all these mainstream-news-media stories explaining why Apple shares are going straight to $1,000. But I know from my own experience as a professional trader that even the shares of the best companies on earth don't go straight up. I happened to time it perfectly and help Strike Force subscribers take advantage of the reversal I just knew was in the offing."

Key Questions for Apple Stock

The way we see it, the Apple stock sell-off raises these three key questions for investors:

• No. 1: What's going to happen to Apple shares in the near-term?
• No. 2: If the stock is headed for a volatile stretch, is there any way to profit until the smoke clears?
• No. 3: What's the long-term outlook for Apple - both the company and the stock?

Having worked with him for five years, I've seen Keith make gutsy calls like this - and have them pay off big - time and time again. Since I knew you'd be as interested in his answers as I was, we wanted to share them with you.

Here's what Keith had to say.

First and foremost (Question No. 1), Keith said he expects the near-term volatility in Apple's stock to continue.

That doesn't mean you can't make money right now (the issue I raised in Question No. 2). Keith said he's watching for new opportunities to "short" the stock and generate additional profits for Strike Force subscribers.

"Everyone's been focusing on the drop in the share price, and are worried that carriers may cut subsidies for both iPhone and iPad users - which would naturally erode overall corporate profits," Keith told me. "But the bigger story is going to be played out when Apple releases its earnings [tomorrow]. I think Apple is going to miss on key sales figures related to the iPad. If they do, it's likely to spark multiple downgrades in the weeks ahead, leading to a downside "snowball effect' as the stock corrects further" - and allowing the "shorts" to profit.

Don't think for a minute that the volatile stretch Keith is expecting will finish his interest in Apple's shares: He says the long-term outlook for this company (Question No. 3) is excellent. That's why - if the stock drops far enough, and seems to find support - Keith will look for an opportunity to turn around and become a buyer.

"If I get a sense that there's a point we can step into the fray, we'll be buying," Keith told me. "Even as we speak, institutional traders are looking to short the stock and pound the price down even more. Here's the funny thing about that: Their goal is the same as ours - to get in at a much lower price before riding the stock up to $1,000 a share. I expect that this process could take a quarter or two - but when the opportunity presents itself, you can bet that I'll act quickly."

When Keith senses that it's time to buy Apple again, it's my guess he'll nail that one, too.

source: http://moneymorning.com/2012/04/23/he-predicted-the-apple-nasdaq-aapl-sell-off-heres-whats-next/

Investing in the “New China” with this Telecom Market Stock

By G.S. Early, Contributing Writer, Money Morning

 

How would you like to get in on the ground floor of the telecom market in a country I've dubbed the "New China"?

It's a country that boasts:

• 6% annual GDP growth before, after and during and the global economic meltdown.
• The fourth largest population on the planet. It is also one of the youngest (median age is 28).
• A centuries-long social and economic connection to China and every strategic Southeast Asian economy.
• Foreign Direct Investment that has grown exponentially in the teeth of the global crisis.
• A bigger economy than the Netherlands or Turkey.

I'm talking about Indonesia.

It's a place usually found in the back of the mind of most Western investors. It only crops up if there is an earthquake, a tsunami or political unrest in a far flung province.

But the truth is, Indonesia is nestled in one of the most strategic locations on the emerging market map. It neighbors India, Malaysia, Australia and Thailand.

It also has long historical and economic ties to China.

About 3%-4% of the population is Chinese/Indonesian, and they represent a powerful but quiet voice in the Indonesian economy. That influence, which was buried for many years, is now a highly prized asset.

Investing in the "New China"

From the 1970s until recently, Chinese influence in Indonesian society was largely muted by Indonesian politicians. The Chinese language wasn't taught in schools and Chinese history was stricken from textbooks.

But things are changing rapidly.

In the rice-growing region of Lamongan in Java, students are now being required to speak, read and write Mandarin because Indonesian authorities now realize that there is huge economic advantage in reaching out and learning from its economic compatriots.

Having partners is one of the cornerstones of the new economy; without it and a global reach you're not going to make it.

Telecommunications is one of the keys. It's why I like Telekomunikasi Indonesia (NYSE: TLK).

If Indonesia lives up to its growing reputation as the "New China" then TLK is the new Ma Bell.

This telecom giant has a portfolio of information and communication services, including fixed-wire line and fixed wireless telephone, mobile cellular, data and Internet, and network and interconnection services for 237 million people.

What's more, those 237 million Indonesian people are gaining buying power. The country has just cracked its goal of $3,000 GDP per capita.

While this doesn't sound impressive to a Westerner, let me put it in perspective.

In 2002, the Chinese Communist Party set a goal for $3,000 GDP per capita by 2020. The Chinese hit their goal early, in 2008.

The implications of $3,000 GDP per capita are an economic tipping point for a developing economy.

For example, by 2009, Chinese car purchases had grown to 13.6 million, surpassing the United States. In the first quarter of 2011, car purchases in Indonesia were up 30% to 225,000 units and neared 900,000 by year end. The government has a goal of 1 million sales by 2015 and it's looking like it may hit that early.

The point is, Indonesia is on its way. As one of biggest nations in the world, with access to every major developing economy in Asia, the Indonesian story has legs and a lot of potential for investors.

Telkom (NYSE: TLK) Is Firing On All Cylinders

Looking at TLK specifically, the stock has performed remarkably well through the economic maelstrom that even shook India and China. Since late 2008, the stock has returned more than 80%, including a solid dividend that is now around 4.4%.

Being a young and growing economy with a population demanding the goods established economies already have, the growth prospects are astounding.

Between 2005-2010, mobile phone growth was over 30% a year and land line growth was near 20%.

There are now 250 million mobile phone users in Indonesia, with TLK having a hand directly or indirectly in almost every account. In total, TLK directly controls 70% of the mobile business.

As the company expands, it's encouraging to see TLK keeping control of its bottom line by trimming its workforce (more by early retirement and reallocating duties than by layoffs).

It's also developing partnerships with outside firms where it can learn and profit simultaneously.

For example, it was announced earlier this week that TLK and eBay (Nasdaq: EBAY) will be partnering on an e-commerce venture in Indonesia. It makes sense, since the number of Internet users in the archipelago increased by more than 30% in 2011.

And now that the country is increasingly connected, doing business on their phones, iPads or computers will be the next logical step.

On the dividend side, TLK is thinking about boosting its dividend payout ratio from 50% to 65%, which means even more cash for investors on this total return play.

Its low debt levels help keep the dividend - and dividend growth - reliable. And for this fiscal year, the company is projecting a 7%-8% rise in revenues, while it boosted EBITDA to around 58%.

The institutional money is pouring in and has pushed up the stock, but there's still plenty of headroom. Most individual investors have yet to hear this story.

Trading around a P/E of 13, it's slightly more expensive than its Asian peers, but if you're looking for a dynamic long-term total return pick, TLK is a great buy below 34.

source: http://moneymorning.com/2012/04/23/investing-in-the-new-china-with-this-telecom-market-stock/

Deep Value Found in Small Medtech: Jason Mills

April 22, 2012
Source: George S. Mack, The Life Sciences Report 

The Life Sciences Report: Do you have a theme currently?

Jason Mills: With medical devices, investors must be cognizant of regulatory and reimbursement themes. Overall that environment has been somewhat arduous over the last couple of years, perhaps even more arduous than in the past. Investors are not surprised by this. In addition, some larger medical device markets are seeing more intense competition and resultant price pressures. They are also seeing declining procedural growth, coming down from historic highs. That's the case in some of the areas I follow in cardiology medtech, such as interventional cardiology, drug-eluting stents, electrophysiology with the implantable cardioverter defibrillators (ICDs) and even in atrial fibrillation.

I think medical devices tend to be a stock picker's environment, in which not all stocks are attractive at any given time. There are some obvious reasons for the trough valuations that we're seeing, but these also create opportunities.

TLSR: Negative headwinds are obvious and baked in, but beyond that do you see some of these stocks trading at deep value?

JM: Yes. The valuations for the medical device sector are at levels we haven't seen for years. Back in the early part of the last decade—2001 and 2002, when the tech stock boom was coming off its highs—we saw valuations in small- and large-cap companies down at trough levels, but we're trading well below those levels today.

TLSR: Given these negative factors, what do you look for in a medical device company?

JM: We believe that the most attractive medical device companies possess a few specific characteristics.

First, we favor growth. Growth is at a premium in medical devices today, given that there are fewer markets where critical mass has been achieved in terms of size and continued good growth prospects. Continued growth must be based on a large underpenetrated patient population in which the clinical data suggests the therapeutic modalities have improved patient care. In our view, few medtech companies have prospects for 15%+ revenue growth over the next couple of years. We use that as a screen in our coverage to identify strong growth companies.

Second, we look for an emerging leadership position. We favor companies that are not just players in hot or potentially hot markets, but that are also set to be market leaders for several years. This status is based on differentiated technologies used to treat conditions that are ubiquitous and for which reliable data shows that they are doing a good job for patients.

Third, we look for a pipeline. In order to maintain a leadership position over a long period of time, a company has to continue to innovate. Having new, innovative products in the pipeline is important to maintaining a competitive advantage in some of the nascent markets over time.

Fourth, as far as being attractive for investors, we look for companies that would fit strategically and synergistically within a larger medical device company. The larger medical device companies are generally growth-starved but cash-rich. They have the wherewithal and propensity to do more acquisitions to augment the growth profile of their large medtech franchises.

TLSR: So, growth via penetration is number one; number two is emerging leadership through innovation; number three is the existence of a deep pipeline; and number four is desirability as an acquisition candidate.

JM: That's right.

TLSR: When doing channel checks, you speak to physicians actually using the new technologies. They are by definition more adventurous, and I wonder how you discern if their experiences might translate to the bread-and-butter interventional cardiologist, cardiovascular surgeon or electrophysiologist?

JM: The Edwards Lifesciences Corp. (EW:NYSE) transcatheter heart valve recently went through a very large clinical trial called PARTNER. The company released some data from one arm of that study, and we saw outcomes for physicians who were involved early on and could be considered experts. Then we saw data from physicians who were relatively new to the technology. What we saw was that newer physicians did just as well in delivering care as the more experienced ones. That's one way to get a sense for whether or not a medical device and therapy are transferrable to physicians out in the field once it becomes commercial.

The other way to discern whether a medical device will ultimately become ubiquitous is by talking to the thought leaders and asking them about the pitfalls and snags they encountered early on in delivering therapy.

TLSR: It always strikes me that these interventional cardiovascular procedures are so technique sensitive that the adoption curve is going to be related to ease of use. Where are you currently seeing vigorous uptake of technology?

JM: In medtech, the most excitement exists in areas where delivery of care is becoming less invasive. If patients can spend less time in the hospital and get an outcome that’s as good as or better than that of a patient receiving a more invasive treatment, that's ideal. It also works from a health economics standpoint because hospital stays are typically the most expensive component of an intervention, whether for a surgical or a less-invasive percutaneous medical device intervention.

From an investor's standpoint, what we typically look for is a new device that is at least as good as the competitive, older-generation technology. Does it address a larger patient population? Can you deliver a superior result to the patient? Those are some of the issues you look at, but minimally invasive technologies have been, in general, an area that folks look to invest in.

TLSR: Jason, can we talk about some examples of successful innovation and vigorous uptake?

JM: Yes. The first would be transcatheter heart valves. If a patient's aortic valve is not functioning properly, you have a very symptomatic condition that is not only life-threatening but also affects quality of life. Typically the condition has been treated with a very invasive, open surgical procedure—and it still is treated that way very effectively. However, Edwards Lifesciences and others are developing a percutaneous valve that can be delivered much less invasively and has proven in clinical trials to be superior in treating some patients, especially those who are too old, too sick or too weak to be surgical patients.

Another example is mechanical circulatory support for very sick, end-stage heart failure patients. These left ventricular assist devices (LVADs) have really been miniaturized. Thoratec Corporation (THOR:NASDAQ) and HeartWare Int. (HTWR:NASDAQ) have done a good job of reducing the size of LVADs and making them significantly more durable. We are talking about a very invasive surgical procedure here, but it has been made much easier and has resulted in fewer hospital stays and improved outcomes for those patients.

Peripheral artery disease (PAD) is another area in which we're seeing growth. Treatment involves the use of percutaneous devices to clear out arteries encumbered by plaque and calcium-containing thrombi, and all the other nasty stuff that can build up in leg arteries. Innovative devices are being developed, including new atherectomy catheters, or new drug-coated balloons, that really tackle the issue of PAD and, more specifically, the bad outcome of amputations, of which there are still a couple hundred thousand done annually in this country alone.

TLSR: Can we speak about some of your specific ideas for investors?

JM: I like Edwards Lifesciences, the leader in the transcatheter heart valve segment; HeartWare, which is one of the emerging companies in the LVAD heart-failure segment; and Spectranectics Corp. (SPNC:NASDAQ), which is an emerging company delivering technology for excimer laser energy to treat PAD. STAAR Surgical Company (NAS:STAA) is in the ophthalmology field and is at an inflection point right now with a technology called the implantable Collamer lens (ICL). Some like to refer to it as the implantable contact lens, which gives you the context. It is an emerging competitor to laser-assisted in situ keratectomy (LASIK) eye procedures, which have complications. ICL is an interesting technology that has been around for a while but is now being positioned as a really solid, first-line alternative to patients who want a permanent fix for refractive error.

TLSR: We've discussed Edwards, but tell me the growth story.

JM: The growth story for Edwards is driven by its leadership position in the transcatheter aortic valve replacement market. We think that market will grow to $1.5–2B worldwide, with Edwards leading over the next half-decade. We're modeling its earnings growth over the next couple of years to reflect its penetration of this market. We're looking for its transcatheter valve franchise to grow 40–50% over the next two years and really drive that earnings growth. We think that could be a catalyst for the stock.

TLSR: I keep hearing that the transcatheter heart valve market is really "hot." Has there been any overhype in the amount of the growth that could occur in this realm?

JM: I don't know that I would call it overhype. I think it's been well debated. There are solid arguments on both sides. I don't think anyone argues that the transcatheter valve market treats patients who don't otherwise have options. For those patients, it can never be overhyped.

TLSR: The second company you mentioned is HeartWare International. What is the growth story there?

JM: It starts with our bullish stance on technologies that can be advantageous to an ever-increasing percentage of end-stage heart failure patients. Thoratec, which I cover as well, has done a fantastic job of developing the market. HeartWare is following in Thoratec's footsteps. We expect U.S. Food and Drug Administration (FDA) approval for HeartWare's HVAD left ventricular assist device to come later this year, likely in September. That would put it into competition with Thoratec in the U.S. market. We see market growth for these devices being faster than in most medtech markets over the next several years because the patient population is so severely underpenetrated. We estimate that there are about 40,000 (40K) applicable patients for LVADs in this country, with less than 10% penetration to date. We think the penetration level can rise to as much as 30–40% before we should start to worry about growth decelerating markedly. We have a long way to go. Both Thoratec and HeartWare should compete successfully in this market, but HeartWare is going to grow from very little share right now.

TLSR: What percentage of LVAD candidates are awaiting heart transplants?

JM: Theoretically all of them, but donor hearts are not available. Heart transplants would be ideal, but there are somewhere between 2–3K hearts, at the very most, available at any given time. The likelihood of getting a donor heart is very low. The LVAD companies are working on improving the therapy to make it less invasive and more effective.

TLSR: HeartWare recently announced an agreement to acquire WorldHeart Corp. (WHRT:NASDAQ) for $8 million. The company's shares had been beaten down hard. What does HeartWare get out of this? Is it basically just intellectual property?

JM: This deal triples HeartWare's intellectual property portfolio. It is getting technology in the magnetic levitation (mag lev) field, which is one way to move blood. It previously did not have specific technology on the mag lev side prior to the acquisition. It's another arrow in the quiver of its armamentaria. Whether or not anything comes of it, who knows? But at the valuation it acquired WorldHeart, it seems to be worth the money spent.

TLSR: What is your growth theory on Spectranetics?

JM: The PAD market remains underpenetrated. The end market for procedures to treat PAD is still growing nicely—we think over 10%—which makes it one of the better growth markets in medtech. Spectranetics has a litany of devices based on its excimer laser and catheter technology to provide therapy. It has what could be a "killer app" for treating peripheral in-stent restenosis, which is the bane of interventional cardiology. There aren't too many good options for this problem. The excimer laser catheter from Spectranetics could prove to be a nice option for clinicians treating that condition. We think that kind of application drives the vascular intervention business over the long term.

On the lead management side, Spectranetics has a frontline technology to extract expired leads. Many thousands of ICDs and pacemakers have been implanted over time. Some good quality clinical data proves that taking the leads out, especially when they're infected, improves a patient's survival rates markedly. Spectranetics has seen positive tailwinds in that business. We think both of those areas are primed for accelerating growth over time.

TLSR: This question applies to both Spectranetics and Volcano Corp. (VOLC:NASDAQ). Are either of these companies developing diagnostic or therapeutic tools for vulnerable plaques?

JM: Volcano has been very active in the area of detecting vulnerable plaques. Spectranetics, to my knowledge, has not been involved in the diagnosis of vulnerable plaques.

TLSR: Do you have a story on Volcano, which is in the invasive intravascular imaging and precision guidance market?

JM: We have a Hold rating on the stock. We've been on the sidelines given the general sluggishness in the underlying growth of percutaneous coronary interventions (PCI). The company has done a phenomenal job of outgrowing the underlying trend in the PCI market, which has been weighed down by reports of overutilization of stents. But Volcano has risen above the fray. There has been underpenetration in the use of intravascular imaging, and the company has done a phenomenal job of developing that market. It has an emerging leadership position in fractional flow reserve (FFR), which is another intravascular imaging diagnostic that has proven in clinical trials to be very advantageous. This market is growing, and we anticipate the company growing in the low- to mid-teens for the next couple of years. I think it's one of the best-managed medtech companies in my universe. But we see it as being near full valuation right now, so we're looking for a better entry point for our investors.

TLSR: Any other company that you would like to comment on?

JM: Another big medical device growth area is atrial fibrillation. I follow AtriCure Inc. (ATRC:NASDAQ), which just received FDA approval for a surgical medical device to treat the problem. I think AtriCure has some fantastic prospects over the longer term. It is trying to put its training and education initiatives in place to develop the market, which is challenging for any company, let alone a small company. But I think it will get there. I think it is very well managed with tremendous prospects for growth given that the market presents a big frontier for medical devices and remains underpenetrated.

TLSR: Does AtriCure get a bad rap because of the U.S. Department of Justice issues that it faced?

JM: No. I think that is largely behind the company. The stock experienced a big impact from that, but the management team was open with the Justice Department and answered all its questions. ArtiCure paid a small fine and is now moving forward as a better, stronger, quality-controlled company.

TLSR: Many thanks to you. I've enjoyed this.

JM: I appreciate it.

Jason R. Mills joined Canaccord Genuity after leaving First Albany Capital, where he was managing director and senior analyst covering the medical devices sector, with a specific focus on the areas of cardiovascular health, ophthalmology and sleep disorders. Mills previously served as a vice president and senior research analyst with Thomas Weisel Partners, where he covered companies in the ophthalmology and sports medicine/arthroscopy sectors. Mills holds a master's degree in sports administration from Ohio University and a bachelor's degree in economics from Yale University.

Want to read more exclusive Life Sciences Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Exclusive Interviews page.

DISCLOSURE:
1) George S. Mack of The Life Sciences Report conducted this interview. He personally and/or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Life Sciences Report: None. Edwards Lifesciences Corp. is not affiliated with Streetwise Reports. Streetwise Reports does not accept stock in exchange for services.
3) Jason Mills: I personally and/or my family own shares of the following companies mentioned in this interview: None. I personally and/or my family am paid by the following companies mentioned in this interview: None.

( Companies Mentioned: ATRC:NASDAQ, EW:NYSE, HTWR:NASDAQ, SPNC:NASDAQ,
NAS:STAA, THOR:NASDAQ, VOLC:NASDAQ)

Source: The Life Sciences Report

Weekend update - Nasdaq 100

April 22, 2012
By Scott Pluchau
http://scottpluschau.blogspot.com

Sorry if I have been pounding away at the Nasdaq 100 primarily lately, but I have barely even looked at another contract the past week.  I have a passion for the precious metals, but there is not much going on there in the big picture, and the last thing in the world I want to do is "force" trades or the analysis.  I believe the trading opportunities will continue this week in the Nasdaq 100, and it may be another week of relentless Nasdaq 100 coverage.   But the important thing is the principles of my methodology remain the same for all futures contracts. 

Things may not turn out the way I expect as well, but in the meantime, I am focused on correctly identifying the current phase of development the market is in, and then identifying favorable trade locations from a perspective or "probabilities" and "reward to risk", utilizing proper position sizing/money management.  Keep in mind the greatest trading system in the world is probably useless in the hands of a trader who lacks "discipline", "consistency", and "objectivity".

Before I touch on this week's Commitments of Traders Report, the details of my interpretation of the COT report can be found in the tab at the top of the blog.

The market breadth and volume in the Nasdaq 100 was not bullish in the latter stages of this recent ascent, but it was also the net bearish position that the commercial traders were building upon that had me eager to trade on the short side once a reliable reversal pattern developed.  The commercial traders are historically "trend enders".  I have discussed on the blog how frustrating it was to wave goodbye to each new daily high without being in a trade to the long side at all, but I also strongly believe in my rules.  And there are no rules for "Gambling".  NOT speculating IS speculating.   This has nothing to do with a psychological disorder known as "Loss Aversion".  Loss aversion is devastating for traders.  More on psychology another time. 

There are many posts on the blog about the Nasdaq 100 that include COT coverage, market breadth, the "Double Top" reversal pattern on the daily chart, and intraday pricing patterns in the smaller degree timeframes.  Patience is still warranted, as we are still above minor support on the daily timeframe, but the intermediate term trend is down in my view.

This week's consolidated legacy COT report in the Nasdaq 100 shows a decrease in the open interest of 1,172 contracts with the commercial traders increasing their NET short position by 3,985 contracts.  Each contract in the consolidated report is 100 X the Index.  Assuming the index at 2,674 (closing price for the week), and if my math is correct that is an increase of their NET short position of $1,065,589,000.  Should we small traders soak up a billion dollars in supply?  After you is what I say.  The commercial traders are hedgers and they are transferring the risk, but they won't be transferring it to me.  I am all about accepting risk, but I want to accept the risk the commercial traders don't want.  And that risk is pointing down in price action for the Nasdaq 100. 

The total NET short position of the commercial traders as of the cutoff for this report is $7,230,496,000. 

Until the intermediate term trend changes to the upside, I am either going to short, or I will do nothing.  Should the intermediate term trend change to the upside, I may be back on the sidelines looking for opportunities elsewhere.  Sure money can be made trading to the long side in the Nasdaq 100, but using my methodology, those trades will have "negative expectancy", which means even the trades I make money on, in reality, I am actually losing money.  Over time it is a clear path to ruin.   

This weekend's chart includes the weekly timeframe on the right hand side.  Major support is a long way away, and that "High Volume Node" might become a tractor beam should the Nasdaq 100 continue to slide. 

I couldn't even tell you what Apple is trading for, and I do not look at the chart of Apple ever, but they are reporting earnings this week I believe.  Equity traders believe it is wise to keep an eye on the S&P mini futures, but these days it seems like the traders in Nasdaq 100 mini futures are keeping an eye on Apple.  Perhaps there is something the commercial traders know that we don't?

I may touch on the "Traders in Financial Futures" COT report later, as it is quite interesting in the Nasdaq 100 as well.

(Click on chart to expand)

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Consulting? ScottPluschau@gmail.com
Members Scott's blog are appreciated


Source: http://scottpluschau.blogspot.com/2012/04/weekend-update-nasdaq-100_22.html

Nasdaq 100 patterns of the day

Friday, April 20, 2012

By Scott Pluschau, http://scottpluschau.blogspot.com


I have been all over the Nasdaq 100 mini futures on the blog lately, and some of these posts are worth a review.  The titles are on the right hand side of the blog.

Well the theme lately has been the Nasdaq 100 getting pushed to new highs with a classic reversal signal showing up and being all she wrote for the bulls. 

First chart on the left hand side is a 30 minute showing the well defined intermediate downward trend.  Until there is a solid breakout to the upside, the lower return trendline is a legitimate target in my opinion.  There is only one side of the trade I am going to be on for the near term.  If there are no bearish patterns there are no trades, it's that simple.  Bullish patterns will be ignored, or will be watched closely for failure.  Failed patterns are the strongest signals.  The prior support on the daily chart is likely to offer less support next time than previously, and a breakdown from there will be very bearish in my opinion with the next legitimate target the "High Volume Node" at 2,316.

(Click on chart to expand)

For those who have been following the blog this week we had a near identical reversal pattern on the 5 minute chart at the new highs again.  Right hand side blue oval below shows a "Bearish Engulfing" pattern or "Railroad Tracks".    

More importantly, on the 30 minute intraday chart left hand side blue oval below shows a "Shooting Star" reversal pattern after the highs as well.  The larger the degree timeframe the more reliable the pattern.  Both of these had confirmation and down we went into the close.

Source: http://scottpluschau.blogspot.ca/2012/04/nasdaq-100-patterns-of-day.html
twitter/ScottPluschau
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Textbook Pattern today in the Nasdaq 100

April 19th 2012

By Scott Pluschau,  

http://scottpluschau.blogspot.com

I have been all over the developing and continuing weakness in the Nasdaq 100 mini futures recently.  The right hand side of the blog has the titles for articles of which many are worth reviewing in the Nasdaq 100. 

Well, as long as the Nasdaq 100 is in the downward sloping "Channel" there is only one side of the trade I will be on.  Today is a great day to review.  The Nasdaq 100 had a breakout to the upside of the "Channel", and there was nothing behind it afterward (See left hand 1 hour chart below).   What are the strongest signals?  Failed moves or patterns.  Today's volume was the single highest total so far in the year 2012.  This is a confirming bearish signal of weakness and distribution.

Next a classic "Head and Shoulders" pattern developed on the 5 minute intraday chart  (See right hand side chart below).  The head and shoulders pattern is a five point bearish reversal pattern.  The proper entry point is on the breakdown of the neckline which especially in this situation of the larger degree time frame offered good enough probabilities in relation to the multiple of "reward to risk".  I use the "Measured Rule" as a profit taking target, which is taking the distance from the top of the head to the neckline and adding it onto the breakdown point.  I have this marked on the chart with blue dashed trendlines. 

The proper risk management in this situation calls for a stop loss placed above the right shoulder where I marked a grey X.  This is the location where the trade idea would have been invalidated.

I believe there are only two things to do once a trade has been executed with an OCO bracket.  Add to it on a continuation pattern that develops, or ignore random market behavior.  "Tickeritis" is a disaster for traders who have a good trade on.  Losses are a part of the business and to be expected.  In this situation a loss would have been gladly accepted for the opportunity at a profit.

There is risk that should be embraced and there is risk that should be avoided.  I believe the main reason why traders get anxiety when placing trades or anxiety once in a trade, is because they are either trading "randomly" or because they have no "edge", which basically means they are guessing/betting and not speculating.

On a side note, check out the subscription section of Scott's blog. 

(Click on chart to expand)

Find Scott on twitter/ScottPluschau
Consulting? ScottPluschau@gmail.com
Members Scott's blog are appreciated

Source: http://scottpluschau.blogspot.com/2012/04/textbook-pattern-today-in-nasdaq-100.html

April 19th - Nasdaq 100 Bounces Off Support

by Scott Pluschau

http://www.scottpluschau.blogspot.com

In the daily time frame, the Nasdaq 100 mini futures had a nice bounce off support while forming three consecutive "Bull Flag" type patterns on the 5 minute chart with very strong market breadth internals yesterday.

(Click on chart to expand)

A different look at the chart below shows the daily chart in a "Bull Flag" type pattern as well.  A look at the 1 hour chart left hand side below shows this close up.  What I think is important to note, is the increasing volume in the flag on the daily chart.  What I would rather see if I was currently long in a swing or position trade would be a decrease in volume in the flag in order to give me confidence of holding on and adding to the trade on a breakout.  That would be the most bullish scenario from a perspective of "probabilities".  I think we are intermediate term in a downward trend until the bulls can at minimum get a breakout off the flag with a significant increase in volume. 

Any bearish market internals today with the proper bearish pricing pattern will have me ready to execute on the short side.  Perhaps a winning trade into the close will be left to ride toward the lower return line target of approximately 2,640.

 
I have included the "Volume Profile" on the daily chart.  The volume profile shows the market volume by price and not by time.  Should the bull flag fail or breakdown then the "High Volume Node" at 2,316 might be a legitimate target in my opinion with the proper risk management, trade management, and position sizing/money management. 

Keep in mind 2,316 target is not a "prediction".  It is too early to target that now in my opinion.  What I am doing is looking ahead and preparing a possible trade plan, based on what I see "today".  Any and all of my views can change without notice. 


I do my best to tweet out my posts promptly on twitter/ScottPluschau
Consulting? ScottPluschau@gmail.com
Members to Scott's blog are also appreciated

Source: www.scottpluschau.blogspot.com/2012/04/nasdaq-100-bounces-off-support.html

Tech Sector ETFs: Perfect for Investors

By Don Miller, Contributing Writer, Money Morning

Despite the recent selloff, shares of Apple Inc. (NASDAQ: AAPL) have skyrocketed 48% in the first quarter, dwarfing the 12% gain posted by the S&P 500.

Apple's astonishing rise has also helped to underpin the Nasdaq Composite, which gained nearly 19% in the first quarter -- its strongest showing since 1991.  But that's not the only place to experience the "Apple Effect." Many investors who own technology ETFs -- which hold almost 4% of all Apple shares outstanding -- were rewarded with even better returns.

For instance, theVanguard Information Technology ETF (NYSE: VGT) was up 20.85% in the first quarter. Even better, the iShares Dow Jones U.S. Technology Index Fund (NYSE: IYW), was up 21.77%, thanks in part to Apple.  Now the question is: Can Apple's momentum continue to drive technology ETFs higher?

Is Apple Inc. (NASDAQ: AAPL) Too Big?

Apple, the world's largest company with a market cap closing in on $600 billion, has grown so large that the stock accounts for almost 20% of some of the ETFs tracking the technology sector. For example, Apple represents 18.7% of the Select Sector Technology SPDR (NYSE:XLK), which holds about $9.8 billion in assets overall.

Some analysts are warning that tying your fate so heavily to one investment could be extremely hazardous to your financial health. "This astonishing public valuation has had some unexpected effects...chief among them is the risk of overconcentration, as a great many indices and the ETFs that track them are weighted by market cap," said Dave Fry at ETF Digest.

In fact, many investors are concerned that Apple's amazing performance is pushing the whole market up.
According to data compiled by Bloomberg News, the Cupertino, CA-based company has surged 653% since March 9, 2009, accounting for 8% of the S&P's 103% surge.

Humming Along Without Apple Inc.

But while Apple's influence is one of the largest ever by a single stock, the broader market would still be humming right along without it. Fact is, the S&P 500 would have nearly doubled even without Apple. And even if the tech giant's meteoric first quarter rise is excluded, the S&P still would have jumped by 10.4%, its best start since 1998, according to Bloomberg.

"The rally has been much more than Apple," said Howard Ward, a money manager at Gamco Investors Inc. who helps oversee $36 billion, told Bloomberg. "Apple no doubt has added some sparkle to the technology sector, but all market sectors have risen."  Although it's viewed somewhat differently, the surge in tech stocks in 2012 may remind some investors of the dot.com boom, when the technology sector also led the whole market higher. Mobile computing is everywhere. Cloud computing, text messaging and social media dominate the landscape.

But this tech boom isn't being led by the Internet stocks that left baby-boomers holding the bag at the turn of the millennium. After Apple, the top 10 holdings for the four biggest ETFs include household names like Microsoft Inc. (NASDAQ: MSFT), Intel Corp. (NASDAQ: INTC), and International Business Machines Corp. (NYSE: IBM).

All are surging on the strength of new spending by corporations rebounding from the recent financial meltdown. "Tech firms had come out of this recession enjoying double-digit growth in technology investments from corporations...there are still reasons to be confident about longer-term trends favoring tech firms," according to analyst Robert Goldsborough of Morningstar.

Technology ETFs: Perfect for Investors

A large weighting of one stock in an ETF, such as Apple, isn't good or bad, it's just important to know.
Besides giving you an efficient way to get quick, broad exposure to the sector, ETFs are especially suited to the technology market. They are easy to trade and you don't have to pin all your hopes on one stock, even if Apple is a large part of the portfolio.

One thing to think about is whether you want to own Apple itself -- or the entire sector with a dose of Apple. Matthew Hougan, President of ETF Analytics, says investors who are thinking about using ETFs to play the technology boom should ask themselves what they are really buying into. "Is it the technology renaissance? The mobile device boom? Or Apple's specific creativity, brand and ability to execute?" asked Hougan.

If the answer is yes to one of the first two, ETFs are a good way to play it. However, if it's just a yes to the last question, then just buy Apple stock itself, Hougan says. But with or without Apple, technology ETFs are likely headed higher.

Source: http://moneymorning.com/2012/04/17/will-apple-inc-nasdaq-aapl-keep-driving-technology-etfs-higher/

Mobile Cash: The New Currency Wave

By Shah Gilani, Capital Waves Strategist, Money Morning

 

 

You don't realize it but there's a fortune in your wallet right now. What? You don't see it? That's because you're looking in the wrong wallet. Take out your cell phone. In your hand right now is your financial future if you want to get rich. Your smartphone is about to become your new "digital wallet."

When it comes to your credit, your investments, your banking relationships, how you shop, how you are marketed to and how you pay for everything, your new digital wallet will be at the center of it all. Understanding what kind of hardware your wallet takes, who delivers your digital services, and understanding your relationship to digital money will be the keys to making a bundle off of it all.

In fact, as the race to shape the future of e-commerce and e-payments develops, fortunes will be made by investing in the companies destined to be big winners in this fast-growing trend. With that in mind, here's a snapshot of what's here now, where the trend is headed and how you can ride this phenomenal wave all the way to your own private beach.

The Rise of the Digital Wallet

First, you have to realize that you don't use a lot of cash-even though you think you do. The truth is the whole world is using less and less cash. On the low end, Swedes transact commerce in cash only 3% of the time. Europeans pay with cash 9% of the time. And Americans pay in cash only 7% of the time. The rest of the time we're using credit cards, debit cards, prepaid cards, checks, coupons, the Internet, and increasingly, cellphones.

There are several reasons why we're using cash less. One reason we're using less cash is that governments don't want us using cash. Take America, for example. The U.S. used to issue notes in denominations of $500, $1,000, $5,000, $10,000, and $100,000. Printing of large denomination notes stopped in 1945 and they were taken out of circulation by 1969. Besides the cost of printing and minting cash and problems with counterfeiting, governments like to keep tabs on who has money and who is and isn't paying their taxes.That's a lot easier in the digital world, where electronic transfers are easily traceable. Of course, we've also gotten used to the convenience, and most of the time the "safety" of using plastic and electronic transfer schemes to buy goods and services and pay bills.

So, naturally, as more and more of us lighten our pockets by combining our calculators, our day-minders, our cameras, our memories and our access to the wider world with our smartphone touch screens, it makes sense to dump our wallets in there, too. Identifying trends, new technologies, applications, "contact points" and "stakeholders" in the world of digital commerce and payments is the first step to successfully investing in this soon-to-be explosive space.

This One is Going to be Enormous

And make no mistake about it. It's going to be huge. But first, there are a lot of questions that investors need to address and get the right answers to before they can start counting the gains in their digital portfolios.

For instance...

Who are the players now, who is getting into the business, who will the winners be? What role will telecom providers have? Will they continue to just facilitate connectivity, or will they start buying downstream servicers and vertically integrate new technologies? How will banks react to the threat of disintermediation as new players trample their turf? What trends and needs will shape hardware, and who will emerge as the leading device makers? Who will profit from proliferation of new applications? What will drive software innovation and how much room will there be for existing and up-and-coming contenders in the ever-evolving software wars? What role will social media play in the future of e-commerce and how will social media aggregators monetize interconnectivity of their members? Who will emerge as the point-of-contact device makers, connecting buyers and sellers at point of sale spots? Who will command the high ground in the all-important security services battleground? How will data be stored and by whom? Who will own the data and how will data be monetized? What role will merchants play and how will some steal market share from competitors by using new digital wallet applications? How will global use of digital wallets change marketing and advertising and who will be the big winners in this important space?

There are almost as many questions to ask about who the winners and losers will be as there are opportunities to profit from the inevitable future of a digital wallet world. Here's the thing: I'm all about you and me making money on this rapidly unfolding destiny. But it's impossible to set us all off in the right investment direction in a single article. The space is too big. That's why this introduction to the opportunities inherent in the new age of digital wallets is just the beginning. It will be followed up by more comprehensive reporting providing the details on what I've touched on here.

Investing in the Digital Wallet

And as it develops, you will receive more Money Morning articles about emerging trends and companies that are shaping the landscape in this wild-west frontier. Of course I will be recommending lots of specific investments to my Capital Waves Forecast subscribers, but I will also be supplying my good friend Bill Patalon with great company names and investment recommendations for the avid followers of his Private Briefing columns. Why am I going to give Bill some insightful information and picks? Because Bill has been urging me for more than a year to command this exciting space and apply my research resources to it.

And, thanks to Bill I'm overwhelmed by the opportunities I've uncovered. So, he deserves credit and some hot recommendations that I know he can't wait to pass along to his Private Briefing fans. On Wednesday, I'll dig even deeper into this money-making trend. So stay tuned.

[Editor's Note: In the age of the digital wallet every electronic device will need a first-rate security system.
In fact, 2.5 million cell phone subscribers were hit with malicious viruses just in the first quarter last year. We've found a global cyber-security outfit that is uniquely positioned to corner the market on security for these devices. You can learn more about this investment opportunity by clicking here.]

Source: http://moneymorning.com/2012/04/16/turn-your-digital-wallet-into-a-money-machine/

Vaccine Therapies Hold Promise for Investors: Stephen Dunn

Gold Avalanche: This interview covers Bio Tech companies found on the New York Stock Exchange, the Toronto Stock Exchange, and the Canadian Venture Exchange.

Vaccine Therapies Hold Promise for Investors: Stephen Dunn
Source: The Life Sciences Report

The Life Sciences Report: I’d like to talk about preventive and therapeutic immunization. How large is the preventive vaccine market?

Stephen Dunn: According to the World Health Organization, over 12 million (M) people are reported to die from infectious diseases annually, with the unreported figures much higher. In addition, the number of people afflicted with nonfatal infectious diseases is likely near 1 billion (B), which also represents significant global healthcare and economic costs. While difficult to calculate precisely in dollar terms, the global vaccine market is roughly $30B or more, with the U.S. representing $20B or more. We expect this to grow significantly as there are over 300 infectious diseases and only about 15% of them have an effective prophylactic therapy.

TLSR: We know that governments have to be involved in preventive vaccines. Foundations, such as BIO Ventures for Global Health, the Bill and Melinda Gates Foundation, Wellcome Trust, etc., are also involved. Development costs may be subsidized, but margins will be thin for sure. What's the bottom line? How thin will margins be, and can prophylactic vaccines be profitable to companies and their shareholders?

SD: We expect margins on the basic routine immunizations with low incidence to be around 5%, which investors should treat more like an annuity than a growth vehicle. However, vaccines in new indications, especially those in highly contagious or fatal indications, can command significantly higher margins and represent significant investment opportunities. Examples of this are Merck & Co. Inc.'s (MRK:NYSE) Gardasil and GlaxoSmithKline's (NYSE:GSK) Cervarix, prophylactic vaccines for human papillomavirus (HPV), which causes cervical cancer. These have solid profit margins.

TLSR: Shifting to therapeutic immunization, one high-profile major development project that has come to fruition is Dendreon Corp.'s (DNDN:NASDAQ) Provenge. Uptake has been disappointing, and the company has had a very rough year. Does this bode poorly for other therapeutic vaccine developers?

SD: Dendreon's Q411 results were $77M in Provenge sales, with a 26% gross margin. While this looks like a high margin compared to prophylactic vaccines, it is not enough for a therapeutic vaccine. The patient volume is much lower, with only 250,000 (250K) prostate cancer patients who can be treated versus many millions of people receiving prophylactic vaccines. Provenge is patient-specific and must be custom manufactured, so the cost of production, requiring multiple production centers, is significant. The limitations are certainly a concern for patient-specific vaccines, but there are alternative vaccine approaches for investors.

TLSR: Will therapeutic vaccines developed in the future be less expensive than Dendreon's, which costs $93K/year to treat a patient?

SD: I think the entire therapeutic vaccine industry has taken notice of Dendreon's struggle to cover its costs of manufacturing a patient-specific therapeutic vaccine. The pricing issue is driven by the drug's modest effect on prostate cancer survival, and the fact that a number of new, competing therapeutic options are half the cost. Overall, pricing is always a function of benefit versus alternative therapies, the same as for any drug.

For example, Bristol-Myers Squibb Co.'s (BMY:NYSE) Yervoy, for melanoma, is an immunotherapy that inhibits CTLA-4, augmenting T-cell activation and proliferation. Because there are very few options for these melanoma patients, the pricing of Yervoy at $30K per dose, or $120K for four cycles, is not out of line. In addition, this is an "off-the-shelf" therapeutic, meaning it does not require custom manufacturing for each patient, and the gross margins are significantly higher.

TLSR: Is Provenge the classic first-generation prototype, leading the way while those that follow benefit by being able to produce a product that is cheaper and better?

SD: Provenge is a classic first-generation example of a patient-specific vaccine, and illustrates the high manufacturing costs of that approach. One company addressing the manufacturing issue is ImmunoCellular Therapeutics Ltd. (IMUC:OTCBB), which is developing a patient-specific cancer therapeutic vaccine called ICT-107. The difference is that it can manufacture around 20 doses at once for the patient, versus Dendreon, which can only produce a single patient-specific dose at a time. This should result in significantly better economics.

Another vaccine approach is being used by Immunovaccine Inc. (IMV:TSX.V). This company combines seven antigens found in breast, ovarian and prostate cancers in a sustained-release formulation, rather than manufacturing patient-specific vaccines.

Other manufacturing processes, such as those used in DNA vaccines, can design and produce "off-the-shelf" vaccines faster. These represent third-generation technologies. While no therapeutic DNA vaccine has yet been approved, both Vical (VICL:NASDAQ) and Inovio Pharmaceuticals Inc. (INO:NYSE.A) currently have therapeutic DNA vaccines in various cancer clinical trials.

TLSR: How much can an adjuvant be worth to companies engaged in immune system modification—either therapeutic or preventive?

SD: Competing immunotherapies tend to converge on the same antigens in a specific indication, so the differentiator may lie with the adjuvant. Some research has shown that adjuvants may even be more important than the antigen, resulting in them being called "immunology's dirty little secret." In fact, some suggest that Dendreon's Provenge results may not have been a result of the prostate antigen but rather the adjuvant, because it used a placebo control arm. An interesting pure-play in this space is Stellar Biotechnologies Inc. (SBOTF:OTCPK; KLH:TSX.V; RBT:Fkft), which is the world leader in keyhole limpet hemocyanin (KLH) production for use as an adjuvant and protein carrier. KLH is currently being used as either an adjuvant or protein carrier in over 20 active human clinical trials in various indications. One might think of Stellar as an "arms-merchant" to immunotherapy developers.

TLSR: Thanks for your time, Stephen.

SD: My pleasure.

LifeTech Capital Senior Managing Director and President Stephen Dunn was previously the managing director of Life Sciences Research at Jesup & Lamont, as well as director of research for Dawson James Securities and director of Life Sciences at Cabot Adams venture capital group. He has held management positions in business development, finance and operations having worked in over 25 countries in North America, Europe and the Far East with biomedical companies including Beckman Coulter, Coulter, Cordis (Johnson & Johnson), Telectronics (St. Jude Medical) as well as several smaller companies. With over 25 years within the global biomedical industry, Dunn has negotiated numerous intellectual property licenses, product development agreements, venture funding, mergers and aquisitons and joint ventures. Dunn is a five-star biotechnology analyst on StarMine and has appeared in both the financial and scientific media such as The Wall Street Journal, Newsweek, Forbes, Nature Biotechnology, The Scientist, CNN, Nightly Business Report, BioWorld and many other media outlets. He is also a frequent speaker and panel member for many financial, medical and venture capital events.

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DISCLOSURE:

1. George Mack conducted this interview. He personally and/or his family own shares of the following companies mentioned in this interview: None.
2. Stephen Dunn: I personally and/or my family own shares of the following companies mentioned in this interview: None. I personally and/or my family am paid by the following companies mentioned in this interview: None. Stellar Biotechnologies is currently an advisory client of LifeTech Capital.
3. The following companies mentioned in the interview are sponsors of The Life Sciences Report: Stellar Biotechnologies Inc.; ImmunoCellular Therapeutics Ltd. Merck & Co. Inc. is not affiliated with Streetwise Reports. Streetwise Reports does not accept stock in exchange for services.