Opportunity for all

We can own any stock at any time for as long or as short a time period as we wish. We must continue to use this amazing freedom to our advantage. For comparison, we can't change careers on a dime, change homes, change cars, change spouses, change nationalities. The fact that we can basically have our money in any company that makes any product or service, in any industry, in any country, for any length of time (for such little cost to switch positions) is pretty incredible. Imagine how terrible it would be if we couldn't invest alongside Steve Jobs of Apple, in a way to prevent swine flu, in the shift toward online travel using Priceline, in the shift in coffee business (k-cups).

The most exciting technology stock in the world

Stec (STEC - $29.25) - SSD's (solid state drives) are the next big advancement in computers. In STEC's earnings report last week...this is the highlight - Shipments of our ZeusIOPS Solid-State drives ("SSD") into the Enterprise-Storage market grew to $57.7 million for the second quarter of 2009, an increase of approximately 375% from $12.1 million for the second quarter of 2008, and an increase of approximately 125% from $25.7 million for the first quarter of 2009. I cannot remember seeing a company grow earnings this fast...just 90 days ago the EPS estimate was $.69 for 2010. The estimate is now $2.22. Stunning growth...and it seems like growth has a long way to go according to the CEO on the call.
Here are some of the notes from my best technology resource who is usually very skeptical of new stuff but loves this SSD technology...and gave me the conviction to buy STEC at $23 originally. "Something you will want to look for is who the other big server manufacturers like Dell are going to choose for server SSD's (solid state drives). HP partnered with STEC so Dell and others will need to use SSD's to be able to compete, I haven't seen SSD's as an option on Dell servers yet. There are data centers that have 100,000 drives in one building full of servers. If one data center replaced 100,000 normal drives with 40,000 higher capacity ssd's at $1000 each that’s $40 million in sales from one building. There are thousands of data centers all over the world. Then there are all the normal size corporations that have 10 servers with 10 drives per server so that’s $100,000 per company times hundreds of thousands of corps all over the world. $58 million in sales might only be 20 customers, there are thousands of companies like this waiting to replace old servers that needed to be replaced a year ago before budgets were cut."
I have increased my position in STEC substantially by adding the February $40 calls at $3.10.

Green Mountain Coffee: Roasting Shorts on the Way to $100

Wednesday night, Green Mountain (GMCR - $46) reported sales jumped 60% and earnings surged 118% to 50 cents per share (38% better than already raised estimates). In addition, the company announced a massive distribution deal with Wal-Mart to sell the Keurig Elite B40 Single-Cup Brewer and a variety of K-Cups. With a stunning 50% of the stock short (I cannot think of any company in America I would be so scared to be short) we will most likely see GMCR trade well into the $70's on Thursday.

Here is how I get to $100 for GMCR:

• GMCR is building an amazing recurring revenue business. Once a Keurig coffee machine is placed in homes, hotels and offices; the company has built in recurring sales for a long time selling K-cups.
• With a market cap of just $1.6 billion, this is still a small cap company compared to its potential.
• I am sure Mars would love to buy them out, but bet the company won't sell because it knows it is leading a revolution.
• The company expects to expand its K-Cup production from 2 mln per week to 8 mln per week by this fall. Who else do you know that is expanding production 4x?
• The company is making good progress on the grocery store front, as it is currently in 3,800, but the goal is to get to 15,000 locations.
• Once people buy a Keurig coffee machine, they are buyers of K-cups for a long time.
• This is an unreal OPEN ENDED situation in my mind. Open ended means the company can sell in so many more places and around the world for years to come. The years to come part is what gives stocks a much higher PE. I now think it can (will) earn $2.50 EPS next year (starting 9/09). Put a 40x multiple on this and the stock is $100 before the end of this year.
• My conviction level from 1-10 is 10. I do not post such conviction lightly.

$10 Rule stock with BIG potential

PANL ($10.30) could be a good takeover candidate as the potential of OLED is just too huge for giant tech companies to ignore. Samsung Mobile Display, a venture of Samsung Electronics, said on Sunday the global smart phone market was expected to grow to 500 million units in 2012 from 170 million in 2009 (huge for Blackberry maker RIMM and iPhone maker Apple). Smart phones would account for 29 per cent of the entire mobile phone market in 2012, compared with 14 per cent in 2009, Samsung Mobile Display predicted. It said growing smart phone sales and touchscreen adoptions would boost sales of organic light-emitting diode (OLED) displays, a small but fast-growing display segment. Samsung says OLED displays will become all the rage with an estimated 50 percent market share in the next five years on all mobile devices, including but not limited to mobile phones, PMPs, GPS navigation units and digital cameras. With over $150M invested in OLED research over the past decade, Universal Display (PANL) has built a strong worldwide patent portfolio with over 940 patents issued and pending worldwide. Their portfolio is one of the largest in the OLED field. Universal Display has entered into more than 30 business agreements with manufacturers in Japan, Korea, Taiwan, China and the U.S. These partnerships include companies such as Chi Mei EL, DuPont Displays, Konica Minolta, LG Display, Samsung SMD, Seiko Epson, Sony, Tohoku Pioneer and Toyota Industries.

Something huge is happening

• This post is longer than usual because we need to talk about Amazon and my thesis that this company is on the verge of something huge and game changing (the stock action is starting to indicate it too I believe). I can now envision a day when we read most newspapers, magazines and books on an electronic /wireless device. In this case...Amazon's Kindle. First off, most people want (and need) the mobility of reading books, magazines, and papers away from their computer..so this stuff won't go online. We read books, magazines and papers everywhere...planes, trains, parks, beaches, bed, bathroom, classrooms, offices, couch, etc. We want it in our hot little hand...the lighter and smaller (within reason) the better.
• Imagine the profitability of distributing all this stuff digitally (and wirelessly) instead of printing, storing, shipping, mailing and delivering papers, mags and books. I believe high school and college students could start using the Kindle instead of schlepping heavy textbooks around. Why continue paying $50-200 for a hard bound text book you read once? Printing and distributing is extremely expensive for publishers of books, newspapers and magazines. Publishers would love to see people read their content for a fraction of the cost electronically. Print publishers of all kinds who are now hurting could see profitability improve dramatically.
• Who sends hand written letters anymore? We all use email, instant messages and or text messages now. Now, I believe the print world is changing dramatically right before our eyes. Nearly every paper and magazine is losing circulation and advertisers so fast that many are on the verge of bankruptcy. With a market cap of $33 billion...I am pretty sure Amazon will be more valuable as a technology company distributing everything we read instead of an Internet retailer. It is a LOT cheaper, more efficient ,and saves a lot of trees to get our papers magazines and books electronically.
• Here are the pretty amazing highlights (my opinion) of Kindle device (from Amazon.com). 1. 3G wireless lets you download books in about 60 seconds right from your Kindle, anytime, anywhere; no monthly fees, service plans, or hunting for Wi-Fi hotspots. 2. Lasts 2 weeks without recharging (4 days with wireless turned on). 3. Over 250,000 books plus U.S. and international newspapers, magazines (includes automatic wireless delivery), and blogs available. You have all your books with you at all times. 4. Most NYT bestsellers are $9.99. 5. Amazon's vision is to have every book ever printed, in any language, all available in under 60 seconds on Kindle. 6. At 10.2 ounces, Kindle is lighter than a typical paperback and as thin as most magazines. Barely a third of an inch in profile, you'll find Kindle fits perfectly in your hands. 7. Kindle is completely wireless and ready to use right out of the box--no setup, no cables, no computer required. 8. A copy of every book you purchased is backed up online at Amazon.com in case you ever need to download it again. You can wirelessly re-download books for free anytime. This allows you to make room for new titles on your Kindle, knowing that Amazon is storing your personal library. 9. Kindle's screen reflects light like ordinary paper and uses no backlighting, eliminating the glare associated with other electronic displays. As a result, Kindle can be read as easily in bright sunlight as in your living room. 10. You can increase the text size of your favorite book or periodical with the push of a button. 11. By using the QWERTY keyboard, you can add annotations to text, just like you might write in the margins of a book. And because it is digital, you can edit, delete, and export your notes. Using the new 5-way controller, you can highlight and clip key passages and bookmark pages for future use. You'll never need to bookmark your last place in the book, because Kindle remembers for you and always opens to the last page you read. Kindle makes it easy to search within a book, across your library, in the Kindle Store, or even the Web. To use the search feature, simply type in a word or phrase you're looking for, and Kindle finds every instance in your book or across your Kindle library. 12. You can search and shop the Kindle Store wirelessly right from your Kindle, allowing you to click, buy, and start reading your purchases within a minute. No need to judge a book by its cover. Kindle lets you download and read first chapters for free. 13. With the new text-to-speech feature, Kindle can read every newspaper, magazine, blog and book out loud to you, unless the book is disabled by the rights holder. 14. Come across a word you don't know? Simply move the cursor to it and the definition (includes The New Oxford American Dictionary) will automatically display at the bottom of the screen. Kindle also includes free built-in access to the world's most exhaustive and up-to-date encyclopedia--Wikipedia.org. 15. Transfer MP3 files to Kindle to play as background music while you read. You can quickly and easily transfer MP3 files via USB by connecting Kindle to your computer. 16. With Kindle, you are able to download and enjoy more than 50,000 audio titles from Audible.com (Amazon just bought them out - now we know why) including bestselling audio books, radio programs, audio newspapers, and magazines. Due to their file size, audiobooks are downloaded to your PC over your existing Internet connection and then transferred to Kindle using the included USB 2.0 cable. Listen via Kindle's speaker or plug in your headphones for private listening.
• Why this is potentially (likely) game changing. 1. Readers love the ease, convenience and lower cost of their favorite content. 2. Publishers love it because they save on all the other expensive stuff other than writing (printing, binding, shipping). 3. Amazon loves it because people tend to buy more papers, magazines and books using this device and Amazon's margins are way better too...it is simply way easier and cheaper for all parties.
• Who are the losers from this massive shift that is just starting? UPS (biggest shipper for Amazon), book binders, ink manufactures, paper companies, box manufactures, trash companies, book shelve sellers, & retail book stores.
• To see the Kindle for yourself...visit the site here.
• I am eying Amazon calls for a big move.

Why Comedians are Important

Are comedians indicating a coming change? When Jay Leno, Jimmy Kimmel, Saturday Night Live, Dave Letterman and Jon Stewart all spend a huge amount of time joking about the stock market and the economy (how pathetic and bad it is)...is that a signal of a top in pessimism (and hence some kind of bottom in markets)? The exchange between Comedy Central's Jon Stewart wasn't funny at all actually...Stewart was as serious as a 60 minutes reporter when interviewing Cramer on his show last week. The interview was on the front page of Yahoo news, covered by CNN and made the from page of the NY Times website on Friday. I cannot know if last week was the low for the year...nobody can know that without the benefit of hindsight. What I do know is, when the media (and comedians in particular) cover something this extensively...it is almost always signals a coming top or bottom in that subject matter.

Inequality is everywhere...get over it.

This isn't political in any way...just a random thought. The Government cannot legislate away income inequality any more than we can do away with inequality in attractiveness, height, athletic ability, artistic ability, eye sight, good genes that leads to a long healthy life, intelligence, parenting ability, personality/sense of humor, or coordination. It isn't fair that I don't look like George Clooney, am 6 feet 1, can't dunk like Kobe Bryant, or as funny as Jerry Seinfeld. Imagine a teacher calling you in telling you it isn't fair that your kid is so much smarter than all the other kids in the class. The whole thing is absurd when you extend the inequality argument to every other area of life.