Search results matching tag 'Netflix'

6 ways to revitalize Blockbuster

Minyanville — Wed, 16 Sep 2009 20:16:00 GMT

This article is written by Minyanville's Mike Schuster

Years of mismanagement, increased competition, and ill-conceived promotions have caught up to Blockbuster (BBI). On Tuesday, the company announced plans to close 810 to 960 underperforming locations -- an amount that doubles the previous aim of 410 to 450 stores -- in an effort to stave off the increasing likelihood of Chapter 11.

In addition the shuttered locations, the company said it may revamp 250 to 300 existing stores into used DVD outlets, bringing the total percentage of closed or altered Blockbuster locations to 24% to 29%.

The last few years have been rough for the once-great king of rental video. Netflix (NFLX) has ushered people away from the brick-and-mortar shops to the ease of online rental membership. And Redbox (CSTR) kiosks have been the popular choice for those who need a DVD title for a paltry $1/night fee. Shares have fallen an astounding 95% since its all-time high of $30 in May 2002 and dipped to $0.22 -- its lowest point -- in March of this year. In keeping its ongoing annual losses in check, Blockbuster has curbed its marketing and in-store stock this year, according to the Los Angeles Times. And the chain estimates that each closed store will save $30 million in avoided losses.

But Michael Pachter -- an analyst at Wedbush Morgan Securities -- told the Times that for every closed location, there's an opportunity for Redbox to install a kiosk out front.

As business steadily transfers to Netflix and Redbox, Blockbuster is in dire need of some guidance. As a former employee of the company -- Floor Representative from March '97 to January '98 -- I feel qualified to provide some sound advice for a positive business makeover.

1. With Netflix's "Watch Instantly" feature, Blockbuster's immediate-viewing appeal is severely undercut. Equip each store with an array of TVs, shag carpeting, and beanbag chairs for a quick, cozy, and convenient viewing experience.

2. Some customers prefer Redbox kiosks for their faceless interaction. Train the staff to ignore customer questions, avoid eye contact during transactions, and vacate the premises when asked for a recommendation.

3. Blockbuster locations have been widely criticized for only carrying generic, mainstream titles. Find the Lithuanian equivalent to Confessions of a Shopaholic and promote the title as a Blockbuster exclusive.

4. A Staff Pick generally doesn't carry much weight if the employee is a 17-year-old neophyte. Enroll each employee in film school, bankroll their first three features, and book at least one Village Voice interview before they give an opinion on cinema.

5. Online piracy has curtailed the public's interest in paying for films. Guilt-trip potential pirates by uploading Blockbuster's entire library to BitTorrent sites with the message: "If you enjoyed this movie, please donate $19.99 to your local Blockbuster location."

6. Bring back VHS for a kitschy retro vibe.

No positions in stocks mentioned

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New York subway goes the way of Lehman Brothers

Minyanville — Fri, 26 Jun 2009 14:27:00 GMT

New York's cash-strapped Metropolitan Transportation Agency -- the behemoth that oversees the operation of the city's subways, buses, and commuter rail lines -- has sold the naming rights to one of the busiest subway stops in Brooklyn, and may do the same with stations throughout the system.

Barclays (BCS) will soon add its name to the Atlantic Avenue-Pacific Street station in Brooklyn, a major stop where 10 subway lines and the Long Island Railroad converge. The hook: There are plans to build a huge housing development and sports complex nearby, boosting the area’s prestige -- and the number of people passing through the station each day.

If the Brooklyn project succeeds, don't be surprised if express stops on the West Side line become Starbucks (SBUX), formerly known as 14th Street station; General Electric (GE), formerly 33rd Street-Penn Station; or McDonald's (MCD), formerly 42nd Street-Times Square.

The possibilities are almost endless: There are 468 stations along the system’s 26 lines and 722 miles of track. Advertisers already turn the inside of the subway’s 6,400 cars into rolling billboards. So why shouldn't there be illuminated signs on the tracks saying: “This rat-infested hellhole brought to you by Clorox"?

Sponsored stations are hardly what the subway's creators had in mind. Opened in 1904, the subway was originally intended as an ad-free public space.

More than 100 years ago, when the subway was first introduced, its technology was as new and intriguing as the Internet would be in the 1990s. It was the Steam Age, and electric propulsion was as-yet unproven. At the time, there were no commercial power companies, so the Interborough Rapid Transit Company built what was then the world's largest generating plant on a spot overlooking the Hudson River.

Engineers had to devise new tunneling techniques and equipment to handle the city’s varied geology. But they got the outlines of the system so exquisitely right that today few of the 4.5 million daily riders give the subway a second thought on their way to and from work.

An urban archipelago, New York's 5 boroughs are separated by the harbor and the Hudson, Harlem, and East Rivers. Four of New York’s 5 boroughs are on islands, and water was an early barrier to development. But the area boomed, thanks to its ice-free harbor, the Erie Canal, and waves of immigrants.

By 1900, the city’s population was about 3.4 million, and the lack of an efficient mass-transit system limited the city's growth potential. The subway handily solved that problem, replacing the city’s extensive system of elevated lines, especially in Manhattan.

Clifton Hood underscores the importance of the subway in his book, 722 Miles: The Building of the Subways and How They Transformed New York:

“Conceived by mercantile leaders … who had a far-reaching vision of New York as a commercial metropolis that would dominate world trade, the subway was a political masterpiece that combined business and government in an innovative partnership."

"The subway remade New York City’s landscape by stimulating real estate development in upper Manhattan and the outer boroughs. It changed the way New Yorkers experience their city by moving passengers below ground, shortening distances, and quickening the pace of urban life.”

For most, that's ancient history. Welcome to the future: We’re now faced with the prospect of Columbus Circle -- brought to you by Coca-Cola (KO) -- and South Ferry, brought to you by Intel.

But what the heck -- New York's the media and advertising capital of the world. And the MTA needs the money.

Top Stocks blogging partner Todd Harrison is founder & CEO of Minyanville.com. This post was written by Minyanville Contributor Scott Reeves.

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Will Netflix survive the death of DVDs?

Minyanville — Wed, 24 Jun 2009 15:54:00 GMT

When commercial music first appeared on cassettes, movies soon followed suit. Then came compact discs -- and film soon followed suit. And now that commercial music has all but abandoned a physical media format, the DVD's days are numbered.

Netflix (NFLX) chief executive Reed Hastings is certainly preparing for the moment when DVDs are no longer viable.

The inevitable death of the DVD has long been on Hastings' radar -- ever since the company's inception. Though Netflix set the standard for snail-mailed movie rentals, it has always been poised to take advantage of instant-streaming technology -- as the company name makes clear.

But the shift to streaming media involves a completely new set of issues.

As the DVD industry emerged in the late '90s, Netflix was able to usurp Blockbuster's (BBI) throne by offering up warehouses of narrow, easily-stored discs rather than the bulky cassettes that clogged the limited space at store locations. Netflix had a seemingly unlimited selection of classic and genre films available -- and for a flat monthly fee. But the video-rental industry was changing faster than Blockbuster was able to move, and has left the chain far behind.

Netflix responded to a drop in DVD rentals by introducing subscriber streaming in January 2007 for around 1,000 titles. Since then, members have been able to watch selected films instantly on their home computers for no more than it used to cost to have discs mailed. Impatient users prefer instant streaming, and it's vastly cheaper for Netflix.

The streaming service now includes over 100,000 films. The main problem for Hastings has been -- and continues to be -- procuring licensing fees from the studios. Premium cable networks, such as HBO (TWX), Showtime (VIA), and Cinemax, are already in bed with most movie studios and have purchased exclusive rights to air their programming on cable or through on-demand services. For Netflix, obtaining Internet rights is just as complicated -- if not more so, since the revenue model for streaming video has yet to be determined.

Netflix has found itself in hot water more than once: Sony (SNE) claimed the rental company never had the right to stream its titles online and blocked streaming access to compatible TV units -- including Microsoft's (MSFT) Xbox 360 consoles. PC users were unaffected.

Streaming video to television is a major concern for the top media companies. Netflix's wide selection of films and TV shows trumps anything that network or on-demand services have to offer.

Netflix is also facing a surfeit of competitors. While Blockbuster is no longer a threat, Google (GOOG), Apple (AAPL), Amazon (AMZN), Hulu.com, YouTube, and countless others are scrambling for more eyeballs, more click-throughs.

Speaking with the Wall Street Journal, Hastings said, "As a capitalist, I'd rather have Blockbuster as my primary competitor than all those Internet companies."

But if this competition means a wider selection of titles in a larger format and crisper resolution, those who like to curl up with Jiffy Pop at home are about to be very happy indeed.

Top Stocks blogging partner Todd Harrison is founder & CEO of Minyanville.com. This post was written by Minyanville Contributor Mike Schuster.

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Profit from the switch to digital TV

Louis Navellier — Tue, 16 Jun 2009 12:54:00 GMT

When broadcast stations switched from analog to digital signals this week, Netflix (NFLX), the online movie company, threw a party.

Well, it should have, anyway. That's because Netflix now becomes a competitor to cable television, offering access to "free cable channels" for a much lower price than subscribing to a cable service.

But that's not the only reason I like Netflix. Netflix has taken the movie-watching experience to a whole new level, one that doesn't involve getting dressed and heading to the local video store to rent the latest releases. Instead, Netflix delivers DVDs straight to your mailbox. What's more, the company now offers instant access to many movies over the Internet so you don't even have to wait for the postman.

Netflix is the largest online entertainment subscription service in the U.S., providing more than 10 million subscribers with access to 100,000-plus movies and television shows. Netflix doesn't charge late fees or have due dates, and the company's service employs user ratings to predict individual preferences and make movie recommendations.

In the past several years, Netflix's discs-by-mail service has cut deeply into the market share of traditional video-rental chains like Blockbuster (BBI). With unlimited plans starting at $8.99 a month, Netflix customers can rent at least one DVD at a time and stream as many movies as they want.

Netflix has a major sales advantage due to the fact that many cable companies and satellite services don't even come close to offering the vast array of high-definition movies and television shows that Netflix offers. The company has proven to be recession-resistant and continues to generate new subscriptions.

Netflix Earnings Are Skyrocketing

For the first quarter, Netflix's earnings rose an astounding 76.2% to $22.4 million or 37 cents a share compared with $13.3 million or 21 cents a share in the same quarter a year ago.

During the same period, its sales rose 21% to $394 million. Wall Street was expecting earnings of 33 cents a share on sales of $391.1 million, so the company posted a 12.1% earnings surprise and a slight sales surprise. Netflix ended the first quarter with about 10.3 million subscribers, up 25% from the 8.24 million customers it had at the end of the first quarter of 2008.

See What the Second Quarter Holds for Netflix

The stock has pulled back over 20% from its 52-week high, reached in April. This is a great time to add shares of Netflix to your portfolio. It's a strong buy.

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Bankruptcy for Blockbuster?

Kim Peterson — Tue, 03 Mar 2009 20:16:00 GMT

Nothing like a bankruptcy rumor to demolish a share price. Blockbuster (BBI) has hired lawyers to look into a possible bankruptcy filing, Bloomberg reports. Shares plunged 77% Tuesday to 22 cents before trading was halted.

Late Tuesday, Blockbuster said it was exploring a corporate restructuring, and not a bankruptcy.

The movie-rental chain has been hit hard by Netflix (NFLX), which has been firing on all cylinders for years while Blockbuster struggled to find a strategy for the future. On some days, it went after Netflix with guns blazing, but other times it pursued other ideas, such as its bizarre attempt to buy Circuit City last year.

Blockbuster has 7,500 stores worldwide, and hasn't wanted to cannibalize its retail sales with a by-mail DVD effort (It has a by-mail offering, but has wavered on how heavily to promote it). But the video-rental industry is hurting, despite Blockbuster's many attempts to try to lure people back to stores with in-store kiosks and other offerings.

Netflix investors were reaping the Blockbuster bounty Tuesday, as shares rose nearly 12% on the news to $38.30. Shares were up slightly Wednesday as well.

One option being reported for Blockbuster is a "pre-packaged" bankruptcy that is largely handled out of court. It normally includes agreements with creditors about the future of the company, Bloomberg reports.

Late Tuesday, Blockbuster confirmed it had hired a law firm, but wants to do a corporate restructuring. There are no plans to seek bankruptcy protection, a spokeswoman told the Associated Press. Investors were comforted by the denial, and Wednesday Blockbuster shares have doubled to 44 cents.

Bankruptcy or not, the company doesn't have to confirm one fact: Time and again, it has mismanaged its future, losing focus and missing opportunities while a little-known competitor stole the show.

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Pink slip Monday, but McDonald's and Netflix up

Bernhard Warner and Matthew Yeomans — Tue, 27 Jan 2009 12:06:00 GMT

This post comes from partner site The Big Money.

Another day, another round of layoffs. On Monday, the announcements seemed to go on all day, starting in Europe with Dutch consumer-electronics giant Philips cutting 6,000 jobs, and spreading across the U.S. to the construction, pharmaceutical, telecom, and retail sectors.

The New York Times calculates more than 75,000 jobs in the U.S. and around the world were eliminated by corporate bosses yesterday as the global economic outlook goes from bad to worse. The Guardian reckons it was closer to 80,000, making it "one of the bleakest days in recent memory." CNNMoney.com calls it "Bloody Monday," adding that more than 200,000 job cuts have been announced so far this year, and the nearly 2.6 million jobs were lost over 2008 was the highest yearly job-loss total since 1945.

The relatively hopeful measures of "furloughs, wage reductions, hiring freezes and shorter hours" are not doing the trick for struggling companies, the New York Times says. As the recession bites harder, there's only one option left: mass layoffs.

Yesterday, the cuts hardly discriminated by sector. There were 20,000 job layoffs at construction giant Caterpillar (CAT), 3,400 at Texas Instruments (TXN), a combined 13,000 at Dutch bank ING and Philips and 8,000 at Sprint Nextel (S). And Home Depot (HD) announced it will eliminate 7,000 jobs and shutter its Expo home-design centers.

And across the Atlantic, the economic crisis claimed its first heads of state yesterday, when Iceland's coalition government fell. "As personal savings have been wiped out and joblessness has soared, Icelanders -- once among the world's wealthiest people -- have taken to the streets in protest, banging pots and pans and throwing eggs and toilet paper at [Prime Minister Geir] Haarde and other parliamentary leaders," the Washington Post writes.

Back stateside, New Jersey-based drugmaker Wyeth (WYE), newly merged with Pfizer (PFE), may cut thousands of jobs, too, following the $68 billion tie-up announced on Monday, according to the NYT. But the deal brings a sliver of hope to an M&A-deprived Wall Street.

"Analysts say the proposed Pfizer-Wyeth merger could lead to a spurt of takeovers in the pharmaceutical industry that could help struggling investment banks," the newspaper writes. But even that has a downside: a spate of mergers could "also cause pain for workers in the metropolitan area, which is to drug companies what Silicon Valley is to the technology industry."

The Wall Street Journal has a somewhat hopeful postmerger analysis, noting the Pfizer-Wyeth deal "raised hopes that deal financing was back." But, it adds, the $22.5 billion loan Pfizer negotiated doesn't mean credit has started flowing again.

The lending syndicate, the newspaper writes, received some impressive safeguards. If, for example, Pfizer's sterling credit rating were to fall, it could walk away from their financing commitment. "In the past, sellers typically sought ironclad agreements that weren't contingent on bank financing or buyer credit ratings," the newspaper writes.

Just as Caterpillar and Home Depot, two companies most exposed to the collapse of the U.S. housing market, announced massive layoffs on Monday, there was a rare piece of good news for American home-sellers. In December, home sales rose by 6.5%, a surge not seen since the easy credit days of 2002.

It's too early to call it a comeback, however. According to the WSJ, the unexpected buoyancy in the housing market can be attributed to strong sales of foreclosed homes. Few analysts saw much of any good news in the figures. While bargain hunters may be out in full force, particularly in the western half of the United States where foreclosures have been plentiful, "the glut of foreclosed homes has pushed down prices, and distress sales now make up about half the market," the Washington Post writes.

There is further evidence that some businesses and sectors are indeed recession-proof, however. The first sector won't surprise you: fast food. McDonald's (MCD) beat analysts' expectations with a 5% sales jump in the fourth quarter, "maintaining steady growth as other more upmarket rivals, from Starbucks to Denny's, have been reporting consistently falling sales," the FT writes.

Sales for the fast food chain were particularly strong overseas. McDonalds CEO Jim Skinner announced plans "to invest $2.1 billion in capital to open about 1,000 new restaurants and reinvest in our existing locations," the BBC reports. The other company that seems to be getting a lift from the downturn is Netflix (NFLX).

The company said net income rose 45 percent in the last quarter as it added 718,000 customers. The big draw? Online video streaming, says CEO Reed Hastings.

And, finally, it seems even fallen Wall Street bosses succumb to buyer's remorse every now and then. Ousted Merrill Lynch CEO John Thain offered on Monday to repay Bank of America (BAC) the $1.2 million he spent renovating his office last year, a bill that includes an $87,000 rug and a $35,000 commodes. Thain wasn't entirely contrite, though. He viewed the expenses as perfectly reasonable one year ago. But today maybe not so. "Nonetheless," he wrote in a memo to his former charges, "they were a mistake in the light of the world we live in today. I will therefore reimburse the company for all of the costs incurred.”

This post was written by Bernhard Warner of The Big Money.

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Netflix sees subscriber gain, even in recession

Kim Peterson — Mon, 26 Jan 2009 21:22:00 GMT

In this economic recession, how is it that Netflix (NFLX) has a rock-solid quarter and continues to draw new subscribers?

Shares of the DVD-by-mail rental company are up 7% in after-hours trading Monday after it posted a nice subscriber gain for the Christmas quarter. It was a great three months for the company, which saw its total subscribers grow 26% from last year to 9.4 million. That's 8% more than the third quarter.

Sales for the quarter rose 19% from a year earlier and profit rose about 30%. The company beat analyst expectations in both those areas. In addition, its cost spent to gain a subscriber fell to $26.67 from $34.58.

Just about all the numbers should be well-received by investors, as is the news that Netflix plans to spend up to $175 million buying back stock. Netflix shares are higher than they were a year ago, closing Monday at $30.15.

There are a few things to consider here. First is the notion that Blockbuster (BBI) still is not a significant threat to Netflix's growth. Blockbuster has been hot and cold with its intent to make a run at Netflix, and -- at least for now -- Netflix appears safe.

Also, a Netflix subscription still remains in the "keep" column for households trying to pare down expenses. Part of that is because of its flat-rate subscription system. People know how much it will cost each month and can factor that into budgeting.

Finally, I think Netflix's streaming service, which is now open to Mac users and Xbox Live members, seems to be adding value in subscribers' minds. The growing popularity of movie streaming is likely posing a burden on Netflix's servers and operational costs, but so far the company seems to be handling that without a fee increase.

Netflix is looking to go north of the 10 million subscriber mark in the current quarter.

Netflix opens streaming service to Macs

Kim Peterson — Mon, 27 Oct 2008 19:44:00 GMT

Netflix is finally expanding its streaming-video service to work with Macs, which have been excluded from the offering since it started last year. Anyone with a PC could watch Netflix's vast collection of online movies, but Mac users paying the same subscription fees were not allowed in.

Now, a limited number of Intel-based Mac subscribers can access the online movies, with full availibility by the end of the year.

I doubt this will make much of an impact on Netflix's bottom line, although some people have said they held off subscribing for precisely this reason. Netflix may get a small bump in subscribers, but the additional online movie watching will also weigh on operational costs. Netflix cut its subscriber growth forecast twice this month, now saying it expects 8.85 million to 9.15 million adds next year. That's 100,000 fewer than it expected at the beginning of October.

It's ironic that Microsoft technology allowed Macs to get access. Subscribers will have to download the Firefox browser and Microsoft's Silverlight plug-in to get it to work (which are both free). Silverlight is Microsoft's attempt to compete with Adobe's Flash.

Netflix shares are down 3% today to $18.39.

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The Week Ahead: A few oversold opportunities

Andrew Horowitz — Mon, 20 Oct 2008 06:32:00 GMT

These days, investing at any level is precarious -- unless you are shorting or your portfolio is hedged. Just dipping your toes in the water could have yielded disastrous results. Listening or reading expert opinion shows that many now recommend investing with an eye towards safety through companies with secure dividends. The problem with that idea is that there is no way to tell how secure the dividends are until it is too late.

Earnings season has just started and already reports have been disappointing investors and many stocks have been continuing their fall. If ever there was a time when we didn't need to see hundreds of earnings reports delivered during a five-day span, now would be it. Here's what to watch as we go into this earnings season.

Monday, October 20

This should be an interesting morning as the long-time blue chip American Express will be looking to pull a rabbit out of its corporate hat. Think about it for a moment...aside from the economic slowdown that is creating huge problems, American Express is also dependent on the depressed travel related business. Shares are down 63% from its 52-week high as EPS growth has and is expected to slow precipitously. Analysts are expecting to see $.63 per share of profit for the quarter, which actually seems rather kind given the massive write-offs and heavy debt load the company is carrying. Add to that the fact that institutions have been reducing their exposure and we are potentially in for a pretty nasty move lower if expectations are unrealized. While shares may look cheap to some investors, there is still a good deal of underlying problems plaguing this company. Watch the trading volume closely today for a sign of institutions continuing to unload shares. (18 million average daily share volume)

Any consumer related stock that will be reporting this quarter has the potential for disaster as consumers have been slashing all extraneous expenses they believe are unnecessary. While some may argue that DVD rentals are a necessity, there are several other competing entertainment options available these days including good ole' cable TV that may help to steal sales from Netflix. While analysts are predicting $.31 per share of profit, earlier this month the company announced that they expect fourth-quarter earnings to come in between $.30 and $.38 per share which was above the prior guidance. The company also announced projected revenues for the quarter approaching $355 million. Fundamentally the company looks sound but the real proof will be the outlook that will be discussed in the conference call scheduled for today. With all the competition that is currently vying for a piece of this fragmented industry and the fact that this will undoubtedly be considered a luxury for most consumers, the outlook would seem to be quite negative for the near future.

Tuesday, October 21

Companies within the commodity sector have been feeling some real pain lately. Some of the worse problems have been seen with the steel companies. As hedge funds have been unloading shares and the demand for steel for the construction of automobiles, appliances and homes has seen a historic drop, it is no wonder that AKA Steel Holdings is off 82% from its 52-week high. Between the whipsaw of higher costs that were seen during the summer and the recent evaporation of demand, it is amazing that analysts are still predicting a profit of a $1.45 per share for the quarter. If that result were realized; the P/E ratio for the company would come in at 3. Even as the outlook for the steel industry seems dismal, it appears that the recent sell-off on high-volume may be somewhat overdone. Even with all the bad news, sales have been growing over last several quarters and EPS growth is still reasonable. This could possibly be a case of; "throwing the baby out with the bathwater" and for investors looking for a quick pop there may be some opportunity here. (Note: This is an aggressive contrarian play that is based on an oversold status rather than fundamental and technical logic.)

The above discussion, and recommendation, holds many of the same elements that can be related to Caterpillar. Shares have dropped last month by almost 30% and are now 55% off of their 52-week high. It appears that the deleveraging process by hedge funds, pension plans and other institutions is creating opportunity for investors with a long-term outlook. It appears that if Caterpillar's shares lose another 20%, even the most cautious projections have the forward P/E ratio far below historic levels. Then there is a global recession that continues to worsen causing additional strains on Caterpillar's earnings over the near-term. Sure this is concerning, but demand for construction equipment will continue, as the world population still requires the extraction of commodities in the form of energy and food. Analysts are predicting a solid $1.42 per share for the quarter and it appears that a significant miss is already priced into the shares. If you have the stomach for risk and a long-term horizon Caterpillar may warrant a look as sentiment appears to be very negative.

At this exact point in time it appears that Jerry Yang was very wrong and Steve Balmer was very right. If only Yang would have taken the $30+ per share offer when it was a possibility, shareholders would be close to $20 better off than they are today. As advertising has slowed and the outlook is cloudy, Yahoo! shares are in desperate need of a partner to help actualize their #1 website rank. Earlier this week, Steve Balmer made a subtle announcement (faux pas) that was to Yahoo! shareholders "a shot heard round the world." Since then, he has backtracked saying said that the comment was only in jest. Yet most analysts agree that aside from a significant cultural clash, a marriage of these two companies makes a good deal of sense. Maybe this is one of the reasons that Yahoo! is in the process of laying off upwards of 2,400 (15%) of its workers. On average, analysts are expecting $.09 per share profit for the latest quarter. That is down 20% from the same period last year. With Google surprising to the upside last week, investors have built in an expectation that Yahoo! may also come in strong. Whatever the outcome shareholders would surely throw that all away in hopes for a buyout or merger with either AOL, Microsoft or another yet to be disclosed party. In the end that is really close to the last hope for Yahoo! to actualize value in this competitive marketplace.

Wednesday, October 22

It should be an interesting quarter for McDonalds as the benefit of their dollar menu could finally kick into high gear. While there has been some debate as to the actual profit margin that can be realized, it is important to understand that the dollar menu is more of a marketing plan that looks to bring more people into stores rather than simply sell food for $1. Shares have held up much better than most as it is "only" off 19% from its 52-week high and much of that can be a due to its global diversification and excellent management. Analysts are expecting earnings to come in at $.97 per share, which is a nice increase from the same period a year ago. Most see this as a stock that will have a good deal of insulation from much of the global slowdown. Also, it appears that institutional ownership is on the rise and EPS growth is constant along with steady growth in sales. This is the kind of stock that could be an excellent component of a portfolio by slowly building a position on pullbacks.

Another casualty of the global slowdown is anything related to consumer and in particular the retail sector. There is nothing earth shattering with that observation, but what happened to the idea that a good hedge against many problems was investments in companies that provide cheap goods on thin margins - a.k.a. Amazon.com? Unfortunately, even this company's shares surrendered to the bear. While sales have been consistent over the last few years and even into this quarter, there is a concern that EPS growth is starting to slow at considerable pace and that has shareholders looking at the stock with a concerned eye. It is interesting that institutions have been increasing their holdings, which is both beneficial and problematic. As was discussed previously, institutional holders have been selling shares of everything at a record pace it order to raise capital to meet a high level of withdrawal requests. I wouldn't count out Amazon as most analysts are expecting earnings to come in at $.26 per share, which is 50% more than the same period a year ago. Obviously any growth stock needs to be carefully analyzed before entering within this environment; but, Amazon is here to stay and may actually benefit long-term minded investors.

Thursday, October 23

Flir Systems will report today and expectations are for $.32 per share. The company has shown that it has the ability to continually provide excellent EPS growth and the recent announcement of a five-year, $125 million contract from the Navy has gone somewhat unnoticed during the recent market correction. Once again, institutional ownership is on the rise as we are looking at a company with low debt, excellent earning opportunity and superb earnings stability. If we could magically take out October from its stock history, you would see a classical chart pattern that is signaling a buy at $40. The question remains whether or not the current price below $30 is a reaction to the markets or a projection into the real future for the company. From all the research it appears that it is more of an aberration and we are buyers of this in both Strategy Lab and Client portfolios. (Note: Concurrent with all long position entries we are adding sell-stops to protect against loss while giving us the opportunity for upside gain)

Potash Corp. has an interesting situation that is starting to appear. Earnings are growing, sales are on fire and the projections are solid for continuing growth. Yet, the stock is off 70% from its 52-week high and recently has been punished on a daily basis. Analysts are predicting another blowout quarter, expecting $3.57 per share as compared to $.75 per share in the year ago period. Short shares make up 25% of the total outstanding float, institutional ownership is rising and fundamentally the stock looks strong. Perhaps there is concern about the expectations and long-term ability for agricultural firms but once again, it appears that this is the work of panic selling along with massive deleveraging and liquidation. Unless the world no longer requires food or agricultural products, shares could rebound towards the January low of $105.

One of my favorite positions right now is Microsoft. With a $40 billion share buyback program and an 18% increase in its dividend, Microsoft seems well poised to provide a substantial increase to shareholder value. Whether or not they enter into a transaction with Yahoo! will remain to be seen, but either way there appears to be a wonderful opportunity at these share prices. Last week we entered a position for our Strategy Lab portfolio and would consider increasing the position as analysts are looking for $.41 per share, a 30% increase over the year ago period. Finally, after several missed attempts at a world-class marketing plan, the company has finally found what could be one of the best awareness campaigns with the, "I am a PC" tagline. Needless to say, I am a PC too and I am a buyer.

Friday, October 24

Mark these words: there is going to be tremendous fallout from this market correction when it comes to 401(k) plan options and mutual fund company returns. Neither of the two provide any respectable level of diversification that helped investors and there will be significant legislation and changes to the underlying investment components as we have witnessed a lifetime of savings wiped out in a matter of only six months. This is going to be hugely problematic for companies like T. Rowe Price, Legg Mason, Vanguard, and Fidelity. We've already seen shares of T. Rowe Price drop over 43% from its high and as I see it, there is plenty that could still go wrong. While the government has temporarily guaranteed some money market mutual funds, mutual fund companies still need to figure out how they are going to make up shortfalls from investor withdrawals and commercial paper losses inside of funds and money markets.

The analysts that follow T. Rowe Price are expecting a profit of $.57 per share as compared to $.63 per share in the year ago period. More importantly though is the forward estimates that are showing losses through 2008 and potentially 2009. From a technical perspective, shares are a no man's land with no near-term support in an environment that has no patience for uncertainties. Watch out for a negative surprise here.

Related Reading:

TDI Podcast: Barry Ritholtz Guest

Netflix: TopStocks Tags

Yahoo shares up on Balmer Remark

Disclosure: Horowitz & Company clients may have short and/or long positions in securities mentioned as of the date of publish.

Andrew Horowitz is a money manager and the founder of Horowitz & Company. He is also the author of the bestselling book, The Disciplined Investor . Check out his latest investment idea or listen in as he hosts, The Disciplined Investor Podcast.

Netflix shipping back to normal

Kim Peterson — Fri, 15 Aug 2008 18:15:00 GMT

Netflix is breathing a sigh of relief. Its severe technical problems have been fixed, at least enough for DVD shipments to resume today, the company said.

"With possible rare exceptions, we will get everything out today," a spokesman told Reuters. Looking at the company's five-day stock chart, it's clear that investors are satisfied. Shares dipped close to the $30 mark Wednesday, at the height of the outage, but today they've rebounded to around $32.

I'm amazed at the level of customer loyalty and support for Netflix that appeared in this blog's comments and on other sites. For other companies, an outage like this could have been disastrous. But Netflix customers took it in stride, even using the opportunity to praise the company's normally fast performance.

Top-notch customer service buys a lot of goodwill.