Looks like the region is back in business. e.g. See this report in Washington Post.
I am holding onto my CNRD. Repairing work should pick up.
Wednesday, April 25, 2012
Gulf of Mexico oil drilling activities
(If you can't see the chart in your rss reader, you have to visit the blog directly.)
Looks like the region is back in business. e.g. See this report in Washington Post.
I am holding onto my CNRD. Repairing work should pick up.
Looks like the region is back in business. e.g. See this report in Washington Post.
I am holding onto my CNRD. Repairing work should pick up.
Saturday, April 21, 2012
Tilson and I
I just noticed Whitney Tilson and I have opposite opinions on three different companies:
Interesting...
- He shorts RIMM; I long it.
- He shorts NOK; I think it's likely it will come back. (No position.)
- He longs ACOM; I think its business practice is questionable. (No position.)
Interesting...
I am still the easiest person to fool
I thought I discovered a gem when I spotted a company called Ancestry.com (ACOM).
It eventually turned out to be a dud but I learned a few important things along the way.
Immediately, the following phrases popped up in my mind: "recurring revenues", "network effect", "zero margin cost", "moats",... A quick scan of its financial results brought up something too good to be true: A fast growing business with a market cap of $1 billion and ttm FCF yield at about 11%. Wow, a business with Facebook-like quality at a cheap price!
How could it not been discovered? I couldn't help but decided to look deep.
Then, I spotted something unusual. Short ratio was 10! That was nothing ordinary. What was going on?
I found a couple of bullish articles on Barron's. Nothing looked alarming. I found some writeups on popular investing websites. It appears some investors questioned how much further it could grow and how long the users would keep their subscriptions once they had found what they were looking for. Could these explain the shorts?
Brushing the concern of the shorts aside, I decided to do a search on review sites like Yelp.com to see how satisfied the users were. Here I found my first lead of the real issue. This subsequently led me to more user reports on the Consumer Affairs website. The gist of the issue is:
No wonder their receivable turns are that short. No wonder the platform is sticky. It handcuffs your credit cards to its cashier. This is at the borderline of being a scam.
What are the lessons here?
I am the easiest person to fool. When I re-trace my thoughts, I see a few dangerous signs.
When I initially read the claim that genealogy was the 2nd most popular past time behind gardening, I had a flash of doubt. Isn't family tree discovery an one-off thing? How can it be addictive like World of War Craft or Facebook? Is there really "re-play value"? But Ancestry.com's financials seem to indicate otherwise. And its publications paint a very rosy business. I treated them as "proofs" and suspended my skepticism.
Second, I was too eager to uncover "hidden gems". Now think about it, it's impossible Ancestry.com was under the radar. It's sponsored popular TV show "Who Do You Think You Are" in the States as part of its marketing campaign. My pride clouded my judgments.
Third, you got to wonder why Barron's and other investors were not aware of this questionable billing practice. Probably the sell-side analysts with Barron's had the incentive to turn a blind eye to this...
What saved me from losing more than just a few hours of my times?
(Disclosure: no position)
It eventually turned out to be a dud but I learned a few important things along the way.
Key points:As its name implies, it allows people to trace and discover their family trees and connect with family members. According to its website and annual reports, not only it maintains world's largest genealogy database, it has also been building up a huge collection of user-generated content about their family histories. Another website states that genealogy is 2nd most popular past time behind gardening. Ancestry.com has a subscription model. Users pay a monthly fee to access its database and connect with discovered family members.
- Beware of rationalising doubts with superficial reasonings
- Pride can cloud judgments
- Don't ignore the market
- Use a checklist
- Scuttlebutt is important
- Reflect and improve
Immediately, the following phrases popped up in my mind: "recurring revenues", "network effect", "zero margin cost", "moats",... A quick scan of its financial results brought up something too good to be true: A fast growing business with a market cap of $1 billion and ttm FCF yield at about 11%. Wow, a business with Facebook-like quality at a cheap price!
How could it not been discovered? I couldn't help but decided to look deep.
Then, I spotted something unusual. Short ratio was 10! That was nothing ordinary. What was going on?
I found a couple of bullish articles on Barron's. Nothing looked alarming. I found some writeups on popular investing websites. It appears some investors questioned how much further it could grow and how long the users would keep their subscriptions once they had found what they were looking for. Could these explain the shorts?
Brushing the concern of the shorts aside, I decided to do a search on review sites like Yelp.com to see how satisfied the users were. Here I found my first lead of the real issue. This subsequently led me to more user reports on the Consumer Affairs website. The gist of the issue is:
- Ancestry.com always charges its users upfront for the entire year even though its website implies fees are monthly.
- They make it very hard, if not impossible, for you to cancel your subscription.
- Subscription fee kicks in immediately right after the 14-day trial period. Again, it's almost impossible to stop it.
No wonder their receivable turns are that short. No wonder the platform is sticky. It handcuffs your credit cards to its cashier. This is at the borderline of being a scam.
What are the lessons here?
I am the easiest person to fool. When I re-trace my thoughts, I see a few dangerous signs.
When I initially read the claim that genealogy was the 2nd most popular past time behind gardening, I had a flash of doubt. Isn't family tree discovery an one-off thing? How can it be addictive like World of War Craft or Facebook? Is there really "re-play value"? But Ancestry.com's financials seem to indicate otherwise. And its publications paint a very rosy business. I treated them as "proofs" and suspended my skepticism.
Second, I was too eager to uncover "hidden gems". Now think about it, it's impossible Ancestry.com was under the radar. It's sponsored popular TV show "Who Do You Think You Are" in the States as part of its marketing campaign. My pride clouded my judgments.
Third, you got to wonder why Barron's and other investors were not aware of this questionable billing practice. Probably the sell-side analysts with Barron's had the incentive to turn a blind eye to this...
What saved me from losing more than just a few hours of my times?
- I didn't ignore the market. The market is usually very efficient. Re-assess my edge.
- I went through my checklist.
- I looked beyond the financials. I tried to understand the business from the customer's perspective.
- I reflected upon my past mistakes. This post itself is a reflection. It's so crucial to learn and adjust.
(Disclosure: no position)
Tuesday, April 17, 2012
Thoughts on mobile platforms and ecosystems
I wrote in the RIMM analysis that the mobile platform battle among
iOS, Android, Windows Phone and BB10 is a battle on courting application developers. The platform with the most number of applications wins. I'd like to explore this topic a bit further in this post. This won't be a rigorous dissertation or anything like that. This is just a collection of random thoughts loosely related to the competition.
Stickiness
The history of PC gives us a good point of reference of the competition dynamics. However, I would argue that mobile platforms are not as sticky as PC platforms for the following reasons:
Because of this, I think there is a fair chance Nokia can gain back its status as a key player in the mobile market. What Nokia has to do is just to be different -- different finish, different OS and different user interface.
Being different is a fashion statement. It's personal. It's cool.
Actually, Nokia's marketing department is on the same page with me.
(Well, but that doesn't mean Nokia will be a good investment though.)
Google's hedging strategy
In the ideal world, everything should just be cloud-based. Everthing should be implemented in HTML5, the latest and greatest web standard. Then, there will be no point to have a platform war. An HTML5-based app that works on iOS phone will work just fine on Android phone or any other phone.
However, it is not the case at the moment. This indicates HTML5 is still not mature enough. It is Ray Ozzie's observation that Google's dual-bet approach -- Chrome OS and Android -- is a hedging strategy for exactly this reason.
And if history is a guide, when a dorminant player emerges, it will have every incentive to cling onto its proprietary platform (i.e. the mobile OS platoform) and undermine the standard (i.e. HTML5). That means there is very high chance HTML5 will never become what it can become in the mobile space.
Digital contents
But the prize of the battle is not the licensing revenues of the platform itself. The prize is the control of the distribution channel of digital contents. Amazon "gives away" Kindle in order to have a channel to send you books, videos and music. Google gives away Android in order to have a channel to send you advertisements (and potentially all sorts of stuff).
(Disclosure: Long RIMM, MSFT.)
Key points:
- Mobile platforms are not as sticky as PC platforms.
- Nokia can win back market shares by just being different.
- The importance of the battle indicates HTML5 is still immature and may never be. Google's dual-bet -- Chrome OS and Android -- is a hedge for exactly this reason.
- It is also a battle on distribution channels for digital contents
Stickiness
The history of PC gives us a good point of reference of the competition dynamics. However, I would argue that mobile platforms are not as sticky as PC platforms for the following reasons:
- Mobile apps is a couple of magnitudes cheaper than PC apps. The switching cost in pure monetary term is much lower. Not to mention a lot of the mobile "apps" are just games which have limited lifespan. (Do you still play Angry Birds? Do you still use Excel?)
- The primary users of mobile phones are consumers while business users make up a significant portion of the PC market. Businesses want consistency and resist changes. Consumers are more easily influenced by fad and fashion.
- Related to the 2nd point, mobile phones are more intimate personal items. They are a bit like watches. People want their phones to be an extension of their personality, their public persona.
Because of this, I think there is a fair chance Nokia can gain back its status as a key player in the mobile market. What Nokia has to do is just to be different -- different finish, different OS and different user interface.
Being different is a fashion statement. It's personal. It's cool.
Actually, Nokia's marketing department is on the same page with me.
(Well, but that doesn't mean Nokia will be a good investment though.)
Google's hedging strategy
In the ideal world, everything should just be cloud-based. Everthing should be implemented in HTML5, the latest and greatest web standard. Then, there will be no point to have a platform war. An HTML5-based app that works on iOS phone will work just fine on Android phone or any other phone.
However, it is not the case at the moment. This indicates HTML5 is still not mature enough. It is Ray Ozzie's observation that Google's dual-bet approach -- Chrome OS and Android -- is a hedging strategy for exactly this reason.
And if history is a guide, when a dorminant player emerges, it will have every incentive to cling onto its proprietary platform (i.e. the mobile OS platoform) and undermine the standard (i.e. HTML5). That means there is very high chance HTML5 will never become what it can become in the mobile space.
Digital contents
But the prize of the battle is not the licensing revenues of the platform itself. The prize is the control of the distribution channel of digital contents. Amazon "gives away" Kindle in order to have a channel to send you books, videos and music. Google gives away Android in order to have a channel to send you advertisements (and potentially all sorts of stuff).
(Disclosure: Long RIMM, MSFT.)
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