Phil Pearlman's Blog

Apple had one the greatest runs in the history of markets, maybe the greatest, but that’s over so who might be the next $AAPL?

Google?

Is $GOOG too large already with a market cap of 250B plus? Maybe. The stock is a nine bagger so far from its IPO auction price of 85 in 2004. That ain’t too shabby so maybe its already well on its way. Could it quadruple from here and become the first trillion dollar company?

Its such a dynamic company who knows what could be their next mega earnings accelerator. Like a great boxer they come at you from multiple angles. Mobile advertising is already ramping, hardware, high speed access, social, Google Glass driverless cars…

LinkedIn? 

$LNKD is making a new all time high as I type. They are the one company that appears to be getting social right by not only quickly growing users but revenue as well. They have tapped their platform into the professional and enterprise and disrupted the job search industry. Plus, they have extraordinary management and remain focused.

Amazon?

$AMZN is another company that has managed to transcend its primary business, e-commerce, by growing web services and a leader in the cloud. $AMZN is also now a hardware company with Kindle and has brilliantly tied this to its e-commerce business leveraging both. They have genius leadership and I wonder what they will look like when they finally grow to the point of being so big that they can ratchet margins though perhaps the street is already discounting this given the high some might say absurd valuation.

Facebook?

My gut is to say that $FB will not be the one but perhaps I am affected by recency effects and the IPO debacle still lingers. It is too soon to tell if their recent search initiatives might have anything close to the profound revenue x great margins impact $GOOG search experienced but with a billion users and fast growing mobile usage, it might be too soon to tell.

I also love that for such a large company, they still have the ability to move quickly. Such an ethos can they continue it will somewhere somehow provoke a profound serendipity.

Apple?

Could $AAPL be the next $AAPL? Technicians will tell you that after so much technical damage from 705 to 440, the stock needs time to repair itself before it can truly make an epic run. I buy that. But I also think that the market will go bizonkers if they ever do come up with the next great device which finally and resolutely converges the computer and the television.

Twitter?

One day, we might all look back at the lights going out during the Super Bowl as one of those transformative moments when a company realizes where its potential lies. For those not familiar, Oreo’s was incredibly quick to capitalize on the blackout with an on the fly and topical “you can still dunk in the dark” ad campaign.

This will begin happening more locally as well and I was greeted today by $SBUX quickly buying up Twitter Trending searches related to the big storm now settling over the northeast US and then putting up some clever social ad content.

$TWIT might also wind up being the real time search play though they still have a formidable task ahead in that regard.

All of the companies I mention are already leaders in a way and all of them have or are in the process of transforming themselves into something wholly greater than their primary businesses.

??????

Perhaps, the next $AAPL will not be so obvious as the examples I have cited above and will, like Malamud’s Hobbs, come from out of nowhere.

Thoughts?

 

I spent some time this morning chatting with Jim Rogers.

The audio is not perfect but I’m going ahead and posting it anyway, because my hunch is that many will learn and greatly enjoy.

We focus the majority of the conversation on losses and Jim’s candor and self disclosure is both uncommon and incredibly generous to those who do not have 40 plus years of professional market participation under their belt. His advice is timeless.

Next week, I will review Jim’s book Street Smarts.

 

Taylor Hatmaker’s piece on ReadWrite sharply criticizes the latest iteration of Instagram on the web.

She writes,

The thing that makes Instagram special is that – until today – it was a social network with no web presence. There’s an inestimable charm to how Instagram feels walled-off in its mobile-only realm.  You just don’t interact with Instagram on desktop. The rules are different. It’s like when the power goes out and you have to play board games. And it’s really, really fun. 

Taylor’s view reminds me of the way early fans of a great indie band feel when that band has a huge hit song and suddenly becomes uber famous. Its as if that cool special thing no one knew about has been stolen and so I kind of know how she feels.

I’m sure there are many U2 fans out there who recount seeing the band at some hole in the wall bar in the 70’s and still lament the release of  Joshua Tree in ’87. Those were the days…

Yet, in the case of Instagram, I totally disagree with Taylor’s conclusion and there is a critical product development lesson in there as to why.

Instagram has evolved its web product gradually with a level of good taste and restraint rarely seen and wholly admirable.

They began with nothing on the web. Then, just a sign in page where you could access your account only. Next, individual, permalinked pics, then some profile pages and now this most recent release that is still missing app functions such as Explore.

As a result of this gradual iteration, the site looks beautiful, is simple to use as well as enjoyable and convenient for those such as myself who spend the majority of their time in front of a desktop.

I recall a short blog post from September 2010 by Flickr founder Caterina Fake, in which she succinctly explained how Digg blew their major redesign.  Fake writes,

I think after the initial launch, if you have a large number of users the ‘big launch’ should be avoided as much as possible. The main reason being users can’t digest it all at once. If you release separate features continually over time, users can adapt to each of them give feedback on each, and you can debug and alter them as you see fit. What do we want? Gradual change. When do we want it? In due course.

There’s a huge responsibility that comes with being the iconic mobile native application to evolve and scale a web 2nd strategy. In this case, Facebook ($FB) has gotten it very right by iterating Instagram gradually.

 

 

 

During the very best Maryland sports moments, I am reminded of my youth, listening to Chuck Thompson broadcast Orioles and Colts games.

He is a folksy Baltimore legend and 1993 recipient of the National Baseball Hall of Fame’s Ford C. Frick Award for broadcasting.

His tagline Ain’t the Beer Cold will stay with me forever signifying some of my favorite life moments.

Here’s his description of how he came up with the phrase from his autobiography (ht: Wikipedia):

For years in my game broadcasts I had used the expression, ‘Ain’t the beer cold!’ when things were going especially well for the home team. I got that phrase from Bob Robertson, a spotter who worked with me on Baltimore Colts football games (that were sponsored by the makers of National Beer). Eventually, I received lots of mail from people in the Carolinas, the area sometimes referred to as the Bible Belt. The listeners felt they shouldn’t have to put up with my ad libs about beer with all the beer advertisements they were already exposed to, and I thought they had a legitimate beef. So, I stopped using the line sometime in the 1970s.

Congrats to the Ravens on a brilliant post season and Super Bowl win. Somewhere, Chuck is toasting the occasion with a refreshing Natty Boh.

 

Last week, I wrote a post titled On the Absence of Formal Technical Analysis Education which attracted some attention from the financial blogosphere.  I strongly criticized universities for not broadly and more formally including technical analysis as a part of their curricula and I was surprised and very pleased by the attention because, as I wrote then,

Its absurd that universities still do not formally teach the study of price behavior (technical analysis) and it seems academic finance is way out of touch with real market participants and real risk management.

Thanks Meb Faber who brought this recent working paper to my attention, which supports this view.

Smith, Faugere & Wang’s study titled Head and Shoulders Above the Rest? The Performance of Institutional Portfolio Managers Who Use Technical Analysis takes a methodological approach that potentially allows for greater external validity.

Instead of identifying specific trading rules and then backtesting their predictive capacity using historical price data, the researchers survey institutional portfolio managers for whether they incorporate technical analysis into their investment process and then compare those who do with those who do not.

The study is important to my argument for a few reasons:

1. Effects – The researchers conclude that;

the net effect of technical analysis on the management of institutional equity-related portfolios has been beneficial, although in an unexpected way.

2. The Methodology – There is most often a tension between how well a particular research design reaches a causal conclusion in the lab and how well that conclusion can be generalized into the real world. Traditionally, research focusing on the efficacy of technical analysis has been high on reaching causal conclusions in the lab while sacrificing its ability to generalize those findings into the real world and the much more complex manner in which investors actually incorporate technical analysis.

The present study employs a novel design by surveying institutional investors and is therefore, arguably, more generalizable. It is a welcome shift and might spur more of this type of an approach.

3. Asset Managers Use Technical Analysis – The study finds that 1/3 of U.S. and international/global equity and balanced portfolio investors utilize technical analysis in their investment process. This supports my argument that universities need to teach it if they take seriously the notion of preparing students for their professional future.

The study is great reading for anyone who is interested in this area as it provides an extensive literature review for those who are interested in the history of technical analysis research as well as a detailed description of the novel and potentially more generalizable approach to this research category.

Related Posts:

Academia vs Technical Analysis via The Reformed Broker

Pattern Recognition via Tom Brakke

On Using Technical Analysis via Cullen Roche

Why Does Technical Analysis Make Some People So Angry? via JC Parets

Mutual Funds & TA via Mebane Faber

The Market Technicians Association Educational Foundation

 

 

Make no mistake, this is a gigantuan F.U.

 

$AAPL $SSNLF

 

I’m hypothesizing that market sentiment here is a combination of

1. Very Positive and

2. Highly Fragile.

Think about that combination for a moment. Many are bullish but there is an underlying anxiety or uncertainty to the bullishness which is subject to knee jerk quickly on a market pull back as small as 2-5%.

If this is the case and sentiment is both of these things, positive and fragile, then we can expect to see the beginnings of this abrupt sentiment shift back to negative beginning even on this mild .5% pullback here in the $SPY.

The combination is underlying bullish (as we have seen for the past couple of years) and so if we get the indicative sentiment knee jerk negative, I would view it as constructive for the market. I’m expecting it.

As an aside, there is a parallel here with a psychodynamic theory of narcissism. Kernberg described the ego of the oblivious narcissist as overly positive (grandiose) yet highly fragile which resulted in abrupt mood volatility especially when the exaggerated positive self regard was punctured by failure or injury.

 

 

 

Was it over when the Germans Bombed Pearl Harbor? -John “Bluto” Blutarsky

Tomorrow morning $RIMM will launch its most anticipated phone in the company’s history.

I’m hearing some say that its too late for them, that they’ve already blown it getting crushed by an iPhone $RIMM once mocked and by an open source Android operating system that has been employed by multiple hardware producers and in a gazillion phones across the globe.

Its a fair point. $RIMM was the innovator in the field and once dominated before stumbling badly by failing to adapt to the touch screen and app revolutions. Not only did they stumble  but they have been slow to regain footing and they’re first attempts to catch up were laughable failures.

But, people love the underdog.

They love to lift stars up on a pedestal, then tear them down for missteps and then lift them back up again. They love the comeback kid and this will buy $RIMM the opportunity to regain momentum.

The only thing that matters tomorrow is the product.

If the new phone is awesome, $RIMM will scratch out its place as the third in a field of three. It will give them a chance and buy them some time to doggedly improve new form factors and software and to build an app library.

Bottom line, if the phone is great, $RIMM stands a chance, which, when you think a bout it, is as it should be.

Yesterday, The S&P 500 closed higher for the 8th consecutive day.

It was the first time since November of 2004 that the large cap index had such a long win streak (ht: @eddyelfenbein).

I was curious to see how the $SPX fared after that last streak 8+ years ago.

Here’s the chart:

Two things stand out here.

1. Over 5 months following the streak, the index pulled back a bit.

2. Over 3 years following the streak, the index rallied 32%.