Another Teardown, Another Confirmed Quicklogic Design
June 30th, 2010 | Posted by Global InvestorsWe have recently completed teardowns of the AT&T (T) USBConnect Lightning (manufactured by Sierra Wireless) and Nokia’s CS-18 USB modem in order to confirm our suspicions that Quicklogic (QUIK) had silicon content in each of these designs. Our efforts paid off as we unearthed the company’s CSSP products in both of these potentially high-volume devices.
Today we turn our attention and mini-screwdrivers—and if that fails, a hammer—to Vodafone’s (VOD) Mobile Broadband USB Modem otherwise known as model K3805-Z. This device is manufactured by one of China’s heavyweight telecom equipment vendors, ZTE (ZTCOF.PK). The implications for Quicklogic, a microcap stock, potentially having its cart tied to telecom horses such as ZTE and Vodafone (on top of having already confirmed AT&T, Sierra Wireless (SWIR) and Nokia (NOK) as down channel partners) really requires no further elaboration. Since in the case of a teardown report a picture really is worth a thousand words, let’s go to the pictures. The full teardown report is available for download at Domino Analytics.
The Vodafone/ZTE K3805-Z
Disassembling the device
Quicklogic CSSP (in red circle); part number begins with "CSSP"
Quicklogic CSSP in the Vodafone/ZTE USB design.
We have now positively identified through our proprietary teardown reports three Quicklogic USB modem design wins: The AT&T USBConnect Lightning manufactured by Sierra Wireless, which became available in late-2009; the Nokia CS-18, which just this past week became commercially available, with Canadian wireless carrier Rogers being one of the first to announce it would be selling that device; and now we have confirmed the presence of Quicklogic parts in the Vodfone/ZTE K3805-Z USB modem.
With a market capitalization of just $100 million, and at the very forefront of its revenue ramp as it begins to penetrate very large end markets such as USB data cards, smartbooks and smartphones, Quicklogic appears to be extremely well-positioned to generate outsized returns for investors over the next several years.
Disclosure: Long QUIK
Three ETFs to Own if Paul Krugman Is Right
June 30th, 2010 | Posted by Global InvestorsOn the surface, the G-20 meeting in Toronto last weekend appeared to be relatively uneventful, especially after a debate on China’s currency policies was effectively canceled by Beijing’s surprising shift. One of the few resolutions to come out of the summit was a pledge by G-20 leaders to cut deficits and bring their respective fiscal houses in order. While many analysts and economists cheered the proposal, some decried the plan as a step in the wrong direction, proposing that governments need to continue to spend in order to keep the economy afloat.
One popular economist who has espoused this view is Paul Krugman, a Nobel Prize winner for Economics and one of today’s leading Keynesian economists. Krugman believes that the sudden and premature obsession with austerity with kill any hopes of a recovery and send the global economy into another depression. “It’s almost as if the financial markets understand what policy makers seemingly don’t: that while long-term fiscal responsibility is important, slashing spending in the midst of a depression, which deepens that depression and paves the way for deflation, is actually self-defeating,” writes Krugman in a recent op-ed for the New York Times. Krugman is in favor of continued high levels of spending, arguing that abandoning this path, as many governments around the world seem to be doing, will lead to a Great Depression much like the one in the 1930’s.
Those who subscribe to Krugman’s school of thought should be unnerved by the events of recent weeks; governments around the world have proposed big spending cuts to reduce mounting debt balances. If this path does indeed lead to a double dip and deflation, turbulent times are surely ahead for global equity markets. Companies with cash-heavy balance sheets and securities that pay out robust dividends would likely do better than most, while consumer related and labor-intensive industries could struggle. In deflationary environments, consumers tend to delay major purchases in hopes of securing desired goods later at a lower cost; labor-heavy businesses are likely to see their profit margins fall since wages are generally more sticky than most CPI components.
If Krugman turns out to be correct, markets may be about to fall off a cliff. While most asset classes would be pummeled by the scenario he envisions, some would hold up relatively well or even gain ground. Below, we profile three ETFs that may be interesting plays if Krugman’s assessment is correct.
For investors who think fiscal policies now on the table will hinder economic growth, VXX offers a way to insure against future equity market volatility. This ETN is linked to a futures-based index that has a near-perfect inverse correlation with domestic equity markets; the VIX soared to an all-time high in late 2008 when equity markets plummeted, and has spiked again recently as concerns about global growth have weighed on markets.
If Krugman is right, TLT also makes an interesting play. Long-term bonds offer relatively attractive current returns; more than 80% of TLT’s holdings are in securities that pay a coupon of more than 4%. In a deflationary environment, fixed coupon payments are extremely attractive, since the purchasing power of each payment rises. Some investors have been hesitant to invest in long-term bonds with interest rates at an all-time low; with nowhere to go but up, rate changes have the potential to hammer fixed income securities. But in a deflationary environment, pressure to hike rates disappears altogether, removing one of the biggest threats to TLT.
If markets encounter a deflationary depression, the dollar could become appealing as a safe haven, especially given ongoing trouble in the euro zone. UUP tracks the Deutsche Bank Long US Dollar Index (USDX) Futures Index, a rules-based benchmark composed solely of long USDX futures contracts. The USDX futures contract is designed to replicate the performance of being long the greenback against a basket of developed market currencies: Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc. UUP focuses primarily on the euro (57.6%) and yen (13.6%), with other currencies receiving significantly smaller weightings.
Disclosure: No positions at time of writing.
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Hank Haney on Tiger Woods: A ‘dysfunctional’ relationship
June 30th, 2010 | Posted by Global Investors
Hank Haney, Tiger Woods’ swing coach who parted ways with the world’s No. 1 golfer in May, told Golf Digest in an interview that his relationship with Woods “didn’t get dysfunctional; it always was dysfunctional.”
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June 30th, 2010 | Posted by Global InvestorsThis season can be brutal on your car. Here’s how to prepare. View full post on Forbes.com: News
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U.S. Onshore Drilling: An Oasis in the Midst of BP Crisis?
June 30th, 2010 | Posted by Global InvestorsRife with comical absurdity, “Drill Baby Drill” mentality assumes that we’re smart enough to drill for oil offshore. But the BP disaster in April did a heck of a job disproving that…
All BP had to do was heed the warnings over blow-out preventers [BOPs] — which ultimately failed and contributed to the fireball over the Gulf of Mexico — and BP most likely wouldn’t be in the mess it finds itself in today…
But that’s what happens when people don’t listen
BP’s blowout protector was a 325 ton, $15 million beast that sat at the bottom of the Gulf, controlling pressure or shutting down flow if something went wrong. Had it been working properly, it would’ve kept gas from running up too quickly into the rig, which is exactly what happened and what sparked the explosion of Deepwater Horizon. Had BP listened to warnings, the Gulf wouldn’t be full of oil.
You see for more than a decade, offshore rig operators were told to have other systems in place should the BOP fail. Yet, no one listened… and no one enforced these safety precautions, it seems. And you’d think that after 1,443 drilling accidents in offshore operations — leading to more than 40 deaths, more than 300 injuries, and 356 oil spills between 2001 and 2007 — some one would have enforced something.
It was really only a matter of time before another accident happened.
But you can’t totally blame the BOP in this situation. Human stupidity — er, error — was largely to blame as well…
But while the BP spill is making headlines as the greatest environmental crisis in U.S. history, one industry — the onshore drilling business — is taking center stage. And it’s likely to continue, even if offshore drilling is allowed in the future.
Deep-sea drilling is now public enemy #1 in almost every corner of the country
From Washington to Wasilla… Wall Street to Main Street… Everywhere you turn, politicians, pundits, and average Joes can’t distance himself far enough from deep-sea drilling.
Ohio Republican and House Minority Leader John Boeher now says:
… [T]his tragedy should remind us that America needs a real, comprehensive energy plan… which includes more of everything: more clean and renewable sources of energy such as nuclear power, wind, and solar energy, more alternative fuels, more conservation, and more environmentally responsible development of America’s energy resources.
Brit Hume recently said:
... [I]t’s not a matter of if they’ll be a disaster of some kind resulting of this kind of offshore drilling, it’s only a matter of when. This verifies that argument and becomes a powerful factor in the debate over what to do next. I don’t see any way around the political reality that this will set back the cause of offshore drilling in the United States…
Even Gov. Schwarzenegger of California, who had supported deep-sea drilling off his state’s coast, has now recently changed his mind and come out against it…
And so has President Obama — who, in late March, gave the OK to more offshore oil projects in Alaska, the Gulf, and along the Eastern Seaboard — he is now backpedaling and freezing all new underwater drilling permits… A CBS public opinion poll shows that support for increased offshore drilling has dropped more than 35% nationally since August 2008…
Here’s what you need to own as the calls for more onshore drilling increase
With destruction in the Gulf and a unrealistic call to end off shore drilling, we’ll see more calls for onshore drilling. And any company involved will skyrocket… especially in the oil-rich Bakken area — one of the largest continuous oil accumulations ever assessed in the United States.
Even if the moratorium is gone, investors are likely to come back to on shore drilling stocks… which makes Oasis Petroleum (OAS) even more attractive.
This company has 292,000 net acres under lease prospective in the Bakken and Three Forks areas. And it already had proved reserves of 13.3 million barrels of oil equivalent [BOE] a day by close of 2009 — and average daily production of 3,295 BOE per day in the first quarter of 2010.
Onshore drilling is where smart investors will look to put their money as the Gulf continues to lap oily waves onto its beaches… and beyond.
Disclosure: No positions
Vanguard Will Continue to Chip Away at iShares’ and SSgA’s ETF Assets Lead
June 30th, 2010 | Posted by Global InvestorsBy Matt Hougan
Reports that Vanguard will launch Russell- and S&P-linked ETFs is bad news for iShares, State Street and other ETF competitors.
If you missed the news, Vanguard announced it will massively expand its ETF family, launching size and style indexes tied to the S&P 500, S&P MidCap 400, S&P SmallCap 600 and Russell 1000, 2000 and 3000 indexes.
Vanguard ETF head Rick Genoni said these plans show that “Vanguard is serious about this [ETF] business.”
Its competitors should be seriously worried.
Vanguard first got serious about ETFs in 2006, when it dropped the ridiculous “VIPERS” moniker and renamed its ETFs “Vanguard ETFs.” As it poured energy into marketing the funds, assets started to grow and grow and grow. Since year-end 2006, Vanguard’s ETF assets are up 388 percent, dwarfing the 66 percent growth at iShares and 117 percent GLD-driven growth at State Street Global Advisors.
| 2006 | 2007 | 2008 | 2009 | April 2010 | Growth % | Growth $ | |
| iShares | $238.3 | $324.9 | $252.8 | $338.0 | $397.1 | 66% | $158.8 |
| State Street Global Advisors | $92.6 | $143.0 | $137.9 | $126.6 | $200.6 | 117% | $108.0 |
| Vanguard | $22.3 | $42.0 | $45.2 | $92.0 | $108.6 | 388% | $86.3 |
Note: Data from iShares, Morgan Stanley and IndexUniverse.com. All figures in billions.
On a dollar basis, iShares has dominated all its competitors over this time span, growing assets an incredible $159 billion. But Vanguard is growing much faster on a percentage basis, and it shows no signs of slowing down.
What’s most impressive about Vanguard’s growth is that it has come via plain-vanilla ETFs that were up against well-established competitors. Typically, the ETF industry is a “first come, first serve” one: The first fund to market in any particular category will gather the bulk of the assets. But Vanguard has been able to chip away by offering lower fees and consistent index-tracking performance.
Of course, other issuers have tried offering low fees and solid index tracking, and haven’t had the success Vanguard has had. Anyone remember Northern Trust’s NETS ETFs?
The difference, I think, is that Vanguard enjoys incredible brand allegiance among a certain set of investors and advisers. There are investors and advisers out there who will buy Vanguard products through thick or thin, almost without regard to what competition exists in the market. You see it in the fund-flows data, which shows steady buying month after month after month.
That’s what makes Vanguard’s decision to launch plain-vanilla S&P and Russell ETFs so dangerous to competitors. If another company were to do this, they would have difficulty attracting any assets in what would amount to me-too products. And with limited assets, the new funds would suffer from poor liquidity and wider-than-average spreads. You end up with a classic chicken-or-the-egg problem: The funds have no assets because they trade poorly, and the funds trade poorly because they have no assets.
This is the conundrum that causes so many ETF dreams die.
But Vanguard is different. Vanguard, if the pattern holds, will slowly attract assets to these new funds; month after month after month. Over time, the funds will gain sufficient liquidity to compete with established offerings from iShares and State Street; they’ll get above the $100 million AUM hurdle that many advisers use to screen the ETF universe. And again, over time, Vanguard’s lower-cost structure will help it chip away market share from iShares and SSgA.
Will Vanguard ever actually catch up with those two? I’m not sure. But I do think it will continue to close the gap.
June 30th, 2010 | Posted by Global InvestorsCollege counseling pros divulge their application tips. View full post on Forbes.com: News
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June 30th, 2010 | Posted by Global Investorsby Nick Hodge
For all the perceived evil, you have to give them credit… Goldman Sachs (GS) knows how to make money — lots of it. In fact, they are so good at making money — for themselves and their clients — that for years they’ve been referred to in financial circles as ‘Golden Slacks’.
It’s rumored that they won’t talk to you unless you’ve got $5 million to invest. And they only lend their name to the most exclusive high-end deals and initial public offerings. (They underwrote yesterday’s Tesla IPO.)
Point is, Goldman is the best of breed of Wall Street banks. When they speak… the world listens. And this week, they came out bullish on the solar sector.
Sooner than the Street expects
In a note to clients on Monday, Goldman said it sees “benefits from large-scale projects ultimately overwhelming near-term challenges and accelerating the transition from subsidized markets towards parity.”
More simply, the mass production of solar technology has created economies of scale, making once-expensive solar panels competitive with fossil fuels. Think Henry Ford and the Model T.
While locations with high electricity rates have already reached parity, Goldman thinks it’ll be widespread as early as 2012. That’s “sooner than the Street expects,” according to the note, citing utility projects in the U.S. and China.
And that’s not even the good part…
Tell this to the next person who questions a profitable clean energy future: Goldman Sachs’ official position is that higher-than-expected demand and price declines will deliver stable returns even without subsidies.
I repeat: even without subsidies.
Those aren’t my words. They’re the words of an elite investment bank with a storied history and a $136 share price; a firm that guides countless millionaires to even more profits.
Speaking of subsidies…
As the solar industry matures, subsidies will slowly be peeled away. That’s how new technologies get established. Already Germany is scaling back their generous solar feed-in tariff. It’s already the largest solar market in the world because of it. Recently, Spain announced it too would reduce its solar subsidy program. The details should be announced later this summer. And just this week, Italy said it will reduce its feed-in tariff by 18%.
We’re witnessing the coming-of-age of solar right in front of our eyes. But not every company’s going to make it.
Goldman’s solar calls
Attached to the Goldman client note was a list of solar stocks and their analysts’ opinion of each.
Here are the stocks they initiated coverage on, along with ratings and price targets:
First Solar (NASDAQ: FSLR): Buy rating and $150 price target
SunPower (NASDAQ: SPWRA): Neutral rating, $15 price target.
MEMC (NYSE: WFR): Sell rating, $9 price target.
JA Solar (NASDAQ: JASO): Buy rating, added to Conviction List. $7.50 target price.
Suntech (NYSE: STP): Sell. Target price: $8.40.
Factors for evaluation included margins, pace of cost reduction, strength of balance sheet, customers, and many others. But this list hints at something bigger…
Last year, Suntech and some analysts were boasting it would soon be the largest solar company in the world by production. Now, its sell rating and sub-$10 price target show that high-volume production isn’t all that matters. Companies have got to reduce costs, foster customer relationships, enter new markets, etc.
And with the industry growing so fast, some simply aren’t able to cut it. I expect we’ll see some serious consolidation in the next few years.
…Keep an eye on those solar stocks listed above. Many of them are well below their target prices.
My top pick is the same as Goldman’s: JA Solar (NASDAQ: JASO).
The only difference? They just initiated coverage this week. I got in one year and 40% ago.
Disclosure: Long JASO
Report: Video evidence refutes Michael Vick timeline
June 30th, 2010 | Posted by Global Investors
Michael Vick’s timeline of events surrounding a shooting of a man near a restaurant where Vick’s 30th birthday party was held has reportedly been called into question by video surveillance.
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3 Utility ETFs for Risk Averse Investing
June 30th, 2010 | Posted by Global InvestorsIn a time when fear and uncertainty are causing the stock market to take a roller coaster ride, the attractiveness of the utility sector remains intact, and for good reason.
In general, the utility sector is known for shooting off decent dividends and carries a relatively high degree of safety. The sector remains a safe haven and tends to shine in times of uncertainty because the services that it offers are an indispensible part of life, enabling utilities to have reliable earnings streams.
Another reason utilities remain attractive is because they have overcome many of the regulations that once hindered their performance by driving up operational costs.
Additionally, in a low growth environment, which the U.S. currently is in, utilities provide a yield that is greater than their debt, further boosting their appeal. Currently, major utility players are generating yields north of 5%.
Lastly, there doesn’t seem to be much improvement in the overall health of the U.S. economy. The expiration of the homebuyer tax credit and an abundance of supply are putting a damper on the real estate markets; unemployment levels remain stubbornly high and don’t seem to be improving; consumer confidence remains wary in both the current state of the economy and where it is heading in the near-term future, and the Federal Reserve is keeping interest rates at all time lows, spurring the fear of deflation.
Some diversified ways to gain access to numerous utilities like Exelon Corporation (EXC), Southern Company (SO) and Dominion Resources (D), include:
When investing in these ETFs, it is equally important to do so with caution. A good way to implement this is through the use of an exit strategy which identifies specific price points at which a downward trend is highly likely to occur.
Disclosure: No Positions
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