No Stoping Gamestop

May 31, 2007

Gamestop (GME) has a simple model: Sell new video games and then eventually buy them back from people who have become bored with them. The real power is in the second part of the strategy. GME buys a used game for, about $5-$10 and resell it for $20-$30. The people who feel they need to purchase the newestGamestop Statisitics and greatest can also buy new games at full retail price. Then when they get tired of the game, GME will buy it back for $5-$10 and the cycle can repeat. (and repeat and repeat)

Estimate profit margin per transaction of the used item is at least 100%, far out pacing any other product they offer.

GME also sells new and used gaming systems. This way, they are able to promote video games on multiple platforms.

According to leading marketing information provider, The NPD Group, in 2006 U.S. retail sales of video games, which includes portable and console hardware, software and accessories, generated revenues of close to $12.5 billion, exceeding the previous record of $10.5 billion set in 2005.

The stock has run up during the past 12 months and Read more

Scratching Microsoft’s Surface

May 31, 2007

Microsoft has been working on a new interactive system that will help to revolutionize and bring a more intuitive interface to computing. The first look that we had was from the mind of Steven Spielberg who directed the Movie Minority report. In that movie Tom Cruise was using a multi-touch screen that suspended in mid-air. He used two hands to sort through a huge amount of data in his search to find the answers to a murder investigation.

The opportunity for this type of technology won’t be realized by the consumer for some time, but there is an application in the commercial world within a few specific areas. These could be mapping and weather services, military, education, sales and presentations, kiosk, restaurants and other usersthat can use a platform that will benefit from the added input features.

Microsoft’s stock saw a modest uptick on this major technology enhancement, while Apple saw a $5 leap as they mentioned the new policy of reducing digital rights management (DRM) on the iTunes platform. Also, Apple moved even higher in after-hours trade as the NASDAQ announced a change to the OEX index (NAS-100) which will remove Medimune and now include Apple.Once again, Microsoft shares are not the “cool-hip” stock to own and investors do not see the benefit of rushing in to buy shares. None-the-less, this is cutting edge and has amazing potential. Watch the video on this post and judge for yourself. You will surely mutter WOW at least 3 times during the 3 minute presentation.

 

Guitar Center in Play

May 29, 2007

We have rumors flying around like mosquitoes in the everglades. It is Tuesday and speculation is high about the potential takeover or merger or acquisition or stock buyback or CEO change or whatever can fill the heads of the idea generators. The latest is that Guitar Center is possibly looking to talk with Goldman Sachs about something. Guitar Center Chart

Remember, it is a rumor. unsubstantiated and at-best, questionable. The stock is seeing substantial subside bias in a rather flat market condition. This leads to the conclusion that, once again, short sellers are seeing are getting their shorts squeezed. (figuratively and literally).

Hats off to the article on Fool.com that in January said that this could be the retail buy if the year. They accurately predicted a $52 price. Even so, the fact is that the stock currently has a float of 28.89 million and shorts of about 6 million.

The fact is that this is one more in a string of calls made by investors that are looking to profit from the rumor mill. The stocks meeting this criteria are those that have relatively low volume, high short ratios and are moved easily by news. This particular stock has seen an exaggerated movement in May as earnings were better than expected. The chart shows the particular volume in relation to the movement of the share price. The wider the chart bar, the more volume for that day.

If this rumor is unsubstantiated in a few days, watch this stock’s price deflated towards $48, just as fast as it went up today. Be careful out there to keep a keen eye towards facts. Today alone, rumors are flying around about the takeover of SAY, PALM, IFOX, KR and surely others.

Want the trading recommendations? Either stay away or buy a Put option, just out of the money on the stocks that have this kind of run-up. The leverage is great and the potential for loss is light.

 

Mutual Fund Deregulation – No way!

May 28, 2007

On May 27, 2007 – Chuck Jaffee of Marketwatch writes about a book that proposes changes for the Mutual Fund Industry. He comments, “The mutual fund business is the proverbial camel, the one that was supposed to be a horse until it was built by committee. It is filled with arcane rules and procedures that can make funds perform more like beasts of burden than thoroughbreds. And while investors have worked their way over the hump and have successfully used mutual funds to reach their financial goals, it’s hard not to wonder how the business could be improved.”

The idea came from the book “Competitive Equity: A Better Way to Organize Mutual Funds“. Mr. Jaffee says that, “it made such a compelling story for investors. The book, co-authored by Peter Wallison and Robert Litan, calls for deregulation of the mutual fund industry. I wrote to Mr. Jaffee and he replied that it is best if I were to speak directly to the authors. (Maybe I will)

The basis of this idea seems to be to throw out the Board of Directors of the mutual fund and replace them with Trustees. One of the components to this would be to attempt to stop the requirement of fee oversight by the board and put it in the hands of the fund’s management. The idea is said to help bring on more competition and therefore greater benefit for the fund investors. (Fox and hen house ring any bell?)

There are many problems with this thesis. To keep this post short, we should focus on the most obvious: The fund industry Read more

The Disciplined Investor Podcast – Episode 11

May 25, 2007

The TOP 10 MISTAKES of investing. Avoid them as all cost. Solid advice to help you invest more successfully.

investor mistakesThe TOP 10 MISTAKES made when investing is a key part of the investing process. Avoid the at all cost. We count down the most common areas that cause you to lose money. You need to make sure to avoid these if you want to be a successful investor. podcast 11 image

Listen in to find out how to help yourself get beyond the basic errors that plague the investment process. The truth is that, most investors encounter these same issues every day. Unfortunately, many continually repeat them, over and over. Knowing what they are will make you a much better investor.

SUBSCRIBE to this podcast to keep your portfolio growing. Insight on the markets, stock picks and pans, fund information, interviews and much more… All part of The Disciplined Investor Podcast.

This is one you will not want to miss as it has the basic elements of why so many investors have a hard time reaching their goals.

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