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Common Cents Investment Group. February 28 th 2013. Agenda. T-shirts! MBA info Session E-Board Information Today in the Market Touching base with BBRY… A few thoughts on Qualcomm Stock Pitch by Alex. E-Board Information.
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Common Cents Investment Group February 28th 2013
Agenda • T-shirts! • MBA info Session • E-Board Information • Today in the Market • Touching base with BBRY… • A few thoughts on Qualcomm • Stock Pitch by Alex
E-Board Information • Applications will be sent out after today • Apply for multiple positions… • Applications are due back on March 4th • Interviews will follow to determine best fit with CCIG • We want to integrate next years team with this years • Potentially work on presentations together
Betting on Blackberry • Touching back in on BBRY… • Market Cap: 7.29B • A price to Tangible Asset ratio of 1.17!
Betting on Blackberry • A glance at similar companies in the industry…our good friend AAPL • Total Assets (Sep 28, 2012): • 176,064-4,224=$171,840 M • Market Cap: $432,120 M • Price to Asset ratio: 2.51
Betting on Blackberry • Most suggest that BBRY is a dying company • At which point you price them closer to their liquidation price…which is in essence…their total assets. • With a price-asset ratio at almost equal to 1, we are buying BBRY at their liquidation state • This suggests that BBRY is dead and there is no potential I disagree!
Betting on Blackberry • Noteworthy: • 79 Million users • Very loyal fanbase • Physical Keyboard Fanatics • High Security Requirements • Emerging market consumers • Huge potential with BB10 • Demand has been stronger than previous launches • Sold out in UAE • A white Z10 on eBay Sold for $2,000+
Betting on Blackberry • Noteworthy: • Early estimates say Z10 unit price: $154 • Reasonable Estimations: • $200 contribution margin per phone (variable), year 1 • $40 contribution margin per phone, year 2 • With 80 million current users…20 million units sold is a reasonable estimation • Apple sold 50 million units last year
Betting on Blackberry • Noteworthy: • Most profitable year: • BBRY made $3.4B • Current Market Cap: $7.3B • P/E ratio of 2.15 • AAPL P/E: 10.43 • Samsung: 8.68 • LG: 14.38
Betting on Blackberry • At $14/share… • Riding the liquidation price • Basically a free play at the lottery • They have assets enough to cover what you’re paying for • There is incredible growth potential (admittedly, far from guaranteed) • From my perspective, Blackberry is a go
Semiconductors • “A material which has electrical conductivity between that of a conducto such as copper and an insulator such as glass.” -Wikipedia • They are the foundation for all modern day electronics including radios, cell phones, computers and advanced appliances
GlobalFoundries • Created notably the most world class “chip” factory in the world • Dresden, Germany • Market for “chips” • Smartphones • Tablets • NOT computers
ARM Holdings • Designs and owns physical IP of microprocessors • Related technology & Software • Offer support, maintenance and training services • License and sell developmental tools to systems companies • Owns the design used in most smartphones and tablets
ARM Holdings • Apple, Nvidia and Qualcomm are designing their own ARM-based mobile chips • Made by contract foundries • This is estimated to cost around $1 Billion compared to $3 Billion • Next iPad will be an ARM chip… • New HP and Lenovo laptops will feature ARM chips
Thoughts on ARM • Run through some indicators… • Dividend and Cover: Earnings from last year cover more than three/four times their dividend • Liability: The last statement shows net cash flow on balance sheet • Growth: Solid revenue, earnings and cash flows and the growth is evident
Thoughts on ARM • P/E: A forward P/E of 39.8…not great compared to current P/E • Outlook: Robust trading and a very positive outlook • Put it on the watch list…not sure the price is quite justifiable quite yet
Qualcomm • Typical fully operational computer chip factory $3B investment • The “chip” war is becoming increasingly difficult • Intel is the last mainstream company to design and build their own products • Based in Santa Clara, Calif. Huge overhead! • The demand for low power intake, small processors is huge! • Smartphones, tablets, robotics, etc.
Qualcomm • Built the CDMA chip popularized by Verizon cell phones • An entire portfolio of patents related to the CDMA design • Own the patent to the Snapdragon range of processors • Currently power HTC cell phones and several other major brand devices
Qualcomm Strengths • Strong presence in the mobile and smartphone market • 55% increase in its stock in the last 5 years • Incredible patent power • 4G LTE design keeps cash flow coming • Super margins, growing dividends and cash flows • Increased dividend 10 times in 10 years
Qualcomm Strengths • Currently leader in mobile semiconductor market • Potential for future products • Streamboost was designed to allow routers to optimize bandwidth connection between different internet devices
Qualcomm Weaknesses • Increasing Competition • Currently uses ARM licesnses May be an issue • Cheaper mobile products use Mediatek processors because of lower costs • Broadcom has introduced another LTW product to compete with Qualcomm • Manufacturing • Currently utilize different foundries for production • If the foundry can’t upgrade ($1-5B)…then you are stuck without products
Resources • http://seekingalpha.com/article/1200571-qualcomm-patent-power • http://www.fool.com/investing/international/2013/02/13/should-i-invest-in-arm-holdings.aspx • http://www.nytimes.com/2010/02/22/technology/22chip.html?_r=0
Cardinal Health • Ticker: CAH • Pharmaceutical company based in Dublin, Ohio • Up 12.02% so far this year
Positive Signs • Good analyst opinions (strong buy) http://finance.yahoo.com/q/ao?s=CAH+Analyst+Opinion
Positive Signs • Measures up well against other competitors in the industry • http://finance.yahoo.com/q/co?s=CAH+Competitors
Positive Signs • Recent acquisition of AssuraMed • Leading Direct-to-Home medical supplier • http://finance.yahoo.com/news/cardinal-health-acquire-assuramed-leading-121500935.html
Membership $20 • Cost is only $20 for the whole year! • Benefits: • Member of a very beneficial and informative club that will inevitably be valuable in your future • A network of friends who share a similar interest in investing and personal finance • A virtual portfolio challenge that will strengthen your confidence in investing
Membership • Make sure to check out our website for the presentations Monday night | ccig.osu.edu • Get on our Facebook page and like us! www.facebook.com/ccigosu
Questions? ? • Questions, comments or concerns?