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Ask The Readers: Is this Trading or Investing?

February 1, 2013 by Lazy Man 10 Comments

It’s been awhile since I’ve given an update on some stocks that I’ve been “travesting” in. I just made up travesting as a combination of trading and investing. Previously, I had mentioned how I had this crazy stock trading idea: buying because someone else paid a lot more for it.

Here’s an example with what I did with Facebook. I bought 100 shares $26.83 after it had dropped from the IPO at $38. My theory was that a number of smart people paid the $38 price and paying $26.83 is smarter than paying $38. I bet Mike Piper could write a 100 page book on the problems with that. I did look at things like earnings, projected growth and all that. I also made the purchase because I’ve seen how addicted people are to it. When people get addicted to things, there’s a lot of money to be made and smart people (like those at Facebook) will figure out how to do it.

Facebook recovered and went to $33 where I sold off 75 of my shares to lock in gains and play with the house’s money. Then Facebook dropped and dropped again. My remaining 25 shares at $26.80 weren’t so good when the stock got to $23, $21, $19, and lower. I ended up buying 125 more shares at $22.95 and 50 more $21.09. This gave me 200 at an average price of $22.97. I held on to those as it dropped to $19. As it recovered to $28.43, I sold 100 shares to lock in more profits. I still have 100 shares of Facebook that are well in the black now. If Facebook gets to $35, I could sell off half of those remaining 50 shares to get all the money I originally invested and keep 50 shares that would one could consider “free.”

There are few different investing methods are play here:

Trading – I realize that at times here I’m simply taking advantage of a stock being at a lower price. However, I try to invest in relatively safe companies that I don’t see going anywhere. Facebook isn’t going to financially collapse tomorrow. I also look to see if the price/earnings (P/E) is somewhat reasonable. This may sound funny if you look at Facebook’s price/earnings on many financial websites today as it ranges between 2000 and 3000. However, it was around 70 when I started investing, and this Henry Blodget article says that it is around 50 now. I think there is an accounting reason (updated this week with its latest earnings) why the stock is technically listed at those earnings, but fundamentally the 50 number is closer to what I’ve seen reported.
That article also covers one of the other stocks that I won’t touch due to a high P/E: Amazon. I love Amazon as much as the next person, but it will be a long time before it gets to be any kind of value. Like Blodget says in that article, “I have no idea what [Amazon investors] are thinking.”
Dollar Cost Averaging as Stocks Get Cheaper – As Facebook shares were getting cheaper, I loaded up with more. I didn’t get close to buying them at their cheapest when it was $17 or so, but no one is ever going to buy at the lows and sell at the highs consistently. I had bought enough to get my average price down to $23. As the stock went back up, I was able to take some profits quicker than if I hadn’t bought at the low prices.
Buy and Hold – For all this trading, there is still a strong element of Buy and Hold. I’m not getting out of these stocks every day, week, or even month. The buying and selling of Facebook has happened over a few months and I could keep a final stake in Facebook for years.

Whatever you call it, it’s working for me now. It’s far from fool-proof as big companies do fail. A dozen or so years ago, I probably could have implemented the strategy with Worldcom and lost a good chunk of money never getting that rebound. I’m implementing a similar strategy on a smaller scale with Hewlett-Packard right now and it is a little risky since the company is trying to figure out its identity amongst declining printer, ink, and computer sales.

Bonus Related Thought: Apple

I’ve also started this strategy with Apple. If you look at an Apple chart over the past few years it looks like a classic bubble… except that Apple’s earnings justified the rise in prices. Margins for Apple are shrinking, but earnings are still extremely strong and you can buy it at 35% less than it would have cost you in September. It has more cash than it seems to know what to do with and the P/E sits at around 10… a bargain for a technology company. Lastly, as I said to some friends recently, I have no problem in investing in companies that people get addicted to. Apple and Facebook definitely qualify.

Memorial Day Things I Think

August 28, 2017 by Lazy Man 3 Comments

I hope everyone is enjoying their Memorial Day. I would wish everyone a happy one, but it just doesn’t seem to fit the occasion. I’m pushing back my typical Memorial Day BBQ plans to go to a friend’s house to watch the Celtics-Heat game later this evening. (Update: I was a little slow in getting this out, the game didn’t go as well as I hoped.) Tomorrow, I’ll catch up on the missed BBQ opportunity by making some pulled pork from my friend’s recipe at GenXFinance. In the meantime, here are some things that I’m thinking before I get to the personal finance links.

Looking into Green Cars – My car is currently 11 years old. I’m going with the Tom Brady school of optimism that it has just as many years left. Since that may not match reality, I’m preparing myself by looking into what my next car would be. This time, I’d like to buy something that is lightly ~~used~~ depreciated rather than new. I really like the idea of the new plug in hybrids often abbreviated (PHEVs). The Chevy Volt is one example that is aleady on the market. The Ford C-Max Energi is coming out later this year and that has caught my eye as a good mix of energy efficient savings with a family size car. I hope to expand on this with a more complete article in the coming weeks.
Ultrabooks in Focus – When I’m not thinking about those green cars, I’m looking into Ultrabooks. Those are the thin and light laptops that Intel is pushing. Asus has a Zenbook Prime coming in a month or so that looks to be leap-frog anything else out there by a significant margin. I got a chance to look at a earlier version at the Microsoft Store in Palo Alto yesterday and it was impressive. The Microsoft Store itself was impressive. At twice the size of the Apple Store next door, it was packed.
The Mess that is Hewlett-Packard – This article on how crazy HP’s management is simply amazing to me. It’s amazing that a company with dozens of billions in revenue would have employees bringing home their trash because they cut back on the pick-up. No wonder webOS couldn’t advance smartphones and tablets – it didn’t get a shot.

Hindsight View: How HP Could Have Succeeded With the TouchPad

August 30, 2011 by Lazy Man 9 Comments

I realize you are probably little bored about articles on the HP TouchPad. If that’s the case, I’ve got some good news. I think I’m down to only two final ideas for TouchPad articles left in the hopper and this is one of them.

If you are wondering why I keep writing about the TouchPad, it’s simply because I think it’s the most interesting business story in the last ten years. You rarely have a nearly universally critically acclaimed product fail at two companies for entirely different reasons… only to watch it become so extremely popular after it being discontinued, that consumers can’t find it in stock anywhere. People snap up art and music (Nirvana and Michael Jackson come to mind) after the artist dies, but that doesn’t happen with technology very often. Usually, it’s the opposite reaction, if the technology won’t be continued, because don’t want to invest in it.

In fact, the demand has been so strong that earlier today, Reuters had an article with the following quote: “[HP’s Personal Systems Group head Todd Bradley] said the company could resurrect HP’s short-lived TouchPad tablet computer, which was introduced on July 1 before being terminated only about six weeks later.”

That was followed up by HP announcing it will “produce one last run of TouchPads to meet unfulfilled demand“. Of course their next sentence was, “We don’t know exactly when these units will be available or how many we’ll get, and we can’t promise we’ll have enough for everyone.” That leads me to wonder if HP understands the meaning of the phrase “meet unfulfilled demand.”

I got in a conversation with Kosmo from The Soap Boxers about what I thought HP should have done in hindsight with the TouchPad. (By the way, you should read his article on the HP TouchPad Chaos.) I proposed that they should have released the device with the following sales plan:

Sell the first million at $99 (16GB) and $149 (32GB). That’s a combined one million – so 400,000 of one and 600,000 of another for example.
Sell the 2 million at $149 and $199.
Sell the 3 and 4th million at $199 and $249.
Sell the 4 through 6th million at $249 and $299.
After that it hits full retail price of $299 and $349. There is also an option for an accessory bundle
(like a Touchstone and a case) or $75 app store credit sold in the $349 and $399 range.

Kosmo correctly pointed out that consumers probably wouldn’t like the constantly raising prices. HP would have to reverse the pricing and say that it starts at $299, but those who act quickly can get it with an instant rebate of $200. That instant rebate would just keeps diminishing as product is sold.

Sure some consumers might not like the idea of paying more because they bought it later. I know I’d wouldn’t. It rubs me the wrong way to pay more than I could have. However, I like to think that I’m a little odd in that I run a personal finance blog. I like to think that most people would think the following:

“I’m in the market for a tablet. There are these cheap ones from HP that have gotten a lot of media attention due to them launching with a $99 price. I know there’s are a couple of million out there so this is a platform that people are going to be interested in it. I could pay $199 for this now, or double that for Android tablet, or even more for an Apple iPad2. Gizmodo says, “The TouchPad is the second best tablet you can buy, at any pricepoint.” It seems to be the value for my money.

At this point, you have probably already had the thought, “It’s easy for you to say to sell these at those prices, you aren’t HP losing millions of dollars.” That’s a fair criticism. Let’s look at what the cost to HP would have been in terms of hardware alone. (We can presume there are other costs such as development of the operating system and such, but in HP’s conference call they specifically cited the hardware as being the big cost driving the decision. There’s also the retailer’s margins to consider.) Fortunately, we have details from iSuppli about how much the TouchPad costs to make. Their estimates are $296 for the 16GB and $318 for the 32GB. Using those numbers, I opened up Excel and crunched my estimated numbers. Here’s what it looks like (assuming that consumers buy equal numbers of 16GB and 32GB):

HP TouchPad Business Plan — Click for Larger Image

The top of the spreadsheet illustrates how as the promotion sells, the discounts get fewer and fewer. After selling 3 million of the 16GB and 3 million of the 32GB TouchPads (6 million total), HP would have lost a whopping $548 million dollars. Is that number so large though? They paid 1.2 billion for Palm. The day HP announced they were getting out the hardware market, their stock dropped $12 billion dollars. That same day they bought Autonomy for what was between 7 and 10 billion dollars.

The most interesting thing to me is the next line after the losses. This is the line when the product sells at the retail price of $299 and $349. At this price point, HP actually makes $34 per device sold. It’s not big money, especially considering the other costs (software development, retailers, etc.) that we glanced over. In fact, they are probably still losing money at these points.

However, what they’ve done is got the device in 6 million people’s hands. They would have been able to do with very little advertising costs. The of the $99 tablet is still keeping it in the market. Also at a price point of $299 and $349, it would still be the second best tablet (Gizmodo’s words) at a price that is just over half of the best tablet. The 6 million people are going to want accessories (cases, keyboards, Touchstones) and apps, both of which are higher margin products. They aren’t going to sell enough to make it profitable. It’s a failure right?

No, at this point, HP would unleash the secret weapon, the TouchPad 2 (or TouchPad Pro, or whatever). The IPad 2 cost of materials back in March was around $325. Presumably HP could do something similar for around $310, presuming component costs go down a little in the last 5-6 months and sell at a $399. This may be asking a little much and I’m guessing that those who bought $99 TouchPads aren’t going to quickly upgrade to a $399 tablet. To justify the $399 price, I think you give people something they want, but Apple won’t give them – an SD slot so that they can add as many movies as they want without having to buy a whole new device. You’d have to give them something else, like a faster processor while making it thinner and lighter. This device should hopefully make around $80 a sale, which would likely give HP a profitable product.

I think one of HP’s biggest mistakes was thinking that it walk into the tablet market and just compete with Apple and Google when those two companies have a large installed base, years of advertising, and a ton of buzz. HP needed to get that mind-share, and I think putting aside a billion or two should have been budgeted right from the beginning to accomplish the task.

Let me know what you think of this idea in the comments. In the meantime, I’ve got a FedEx truck to stalk. My TouchPads should be just outside any minute now…

[Update: I was joking about stalking the FedEx truck, but it came ten minutes after publishing this post. Well played, FedEx. Well played.]

HP Touchpad: A Practical, Smart Buy?

July 31, 2011 by Lazy Man 36 Comments

Every now and again, I like to write about technology. Truth be told, I was interested in technology far before I got interested in personal finance… and I raiding my mom’s Kiplinger’s in middle school – perhaps even in elementary school. Today, I’d like to talk about the HP Touchpad, a new tablet computer in the mold of an iPad. If you’ve been reading the weekend roundups around here the last few weeks, you know that it’s been on my mind. Prior that, I’ve been writing about my love affair with the Palm Pre for the last two years. The Palm Pre and the HP Touchpad both use the same operating system, which I (and many technology analysts) consider it the best out there. Unfortunately, you probably have never used it since neither Palm nor HP have put together a marketing campaign that compares with Apple’s or Google’s and they’ve never had a heavyweight partner like AT&T and Verizon pushing their product like those two companies.

I’ve been eying the Touchpad for months. However, I’ve found myself having the same feelings as I had when Apple announce the iPad. It’s very cool, but in a lot of ways, it’s a toy without a purpose. I typically have my laptop near me at home and when I’m out a smartphone does the job. If I had a lot of one-on-one meetings, I could see using a tablet to open up a page or two, or use it to illustrate something that I’m selling. Could it replace my laptop in the living room? For many people it probably could. For me, as a blogger, I have my doubts about using anything without a real keyboard.

HP Touchpad as a Dedicated Blogging Computer?

Those doubts have started to shift. I’m starting to think that the HP Touchpad would be an ideal blogging platform. My mind started to change when I saw this set-up from Joshua Topolsky, the former editor of Engadget:

touchpad-review — The Zen of HP Touchpad, HP Touchstone, and HP Keyboard

In the picture you have the HP Touchpad, the keyboard and the HP Touchstone. The HP Touchstone is the hardest to see, but it’s what’s holding it up at a good viewing angle. By just sitting on the stand, no plugging in of any cords, the tablet charges. If the keyboard wasn’t there, you might think it was a photo picture frame (and it can do that). With only one cord, it’s the kind of technology that my wife would love. (I can’t even begin to count the cords around our television – it’s a mess).

Shortly after that, I saw this official WordPress webOS application and video:

Lazy Man and Money is run by WordPress and I have to say that the demo is extremely compelling. And I’m not saying that just because I want the voice-over guy to read me bedtime stories at night.

One of the difficulties I have with blogging is distraction. I could see creating a blogging nook where I could take the Touchpad and keyboard and get down to business. No longer would I be reading the 157th article about how Albert Haynesworth and Chad Ochocinco are going to work out in the Patriots locker room. (At least that’s the theory.) This concept may be the final thing I need to push me to buy it.

Is the HP Touchpad a Good Value

Value is always a difficult thing to pin down. A good value for me may not represent a good value for you (the exception I believe is MonaVie – a bad value for everyone). In the case of the Touchpad, I might be able to make a financial case for buying one. It may be a bit of a stretch, and there’s at least an 92% chance that I’m trying to convince myself here. I’ll let you be the judge.

The HP Touchpad was released at the beginning of the month for $499 for the 16GB version and $599 for the 32GB version. Those prices were little steep for my tastes. I figured I could justify $100 of the price just for the dedicated blogging platform. Unfortunately, that requires buying the keyboard and Touchstone, which together are around $120 in addition to the Touchpad itself.

Then I noticed that with the Touchpad you get a 50GB Box.net account free for life. Box.net customers pay $20 a month for that level service. If was interested in that service (and on some level I am), the Touchpad would pay for itself in a little over two years. If you are a Box.net customer and plan on continuing to be one for the next couple of years, you might as well collect a free Touchpad. Maybe you can sell it to someone who doesn’t care about the Box.net account and collect the service for life – for the difference in price of what you buy and sell the Touchpad at.

The next “deal” came directly from HP themselves. This “deal” was for current Palm Pre owners. HP had promised that the Pre would be upgradable to the newest version operating system, but when they started dealing with carriers or limited resources, realized they couldn’t deliver on that promise. To “make it right” (their words), they offered $50 off of the 32GB Touchpad. I’m never one to look a gift horse in the mouth, but when you break down the difference in cost of a 16GB and a 32GB it comes to $22. The devices themselves are exactly the same except for the 32GB memory chip is $22 more than the 16GB chip. When people buy a 32GB Touchpad vs. a 16GB Touchpad at the $100 retail difference, HP collects $78 extra dollars. HP, in offering this “deal”, would still be making $28 by upselling the customers who take advantage of it. If you wanted a deal on new webOS phone or don’t need the 32GB version, you don’t get anything… oh and this “deal” expires at the end of the month.

If you couldn’t tell I wasn’t happy with that offer. On one hand, I have to appreciate the effort to turn a negative into a positive. On the other other hand, I think enough people saw through the trick that HP lost even more goodwill with the deal than if they simply didn’t offer it at all. I think it should be studied in business schools for decades. (It deserved its own article here, but hey, I can’t devote too many articles to the HP webOS, right?)

Next, I decided to look around and see if I could buy a Touchpad cheaper than the retail prices of $499 and $599 that it launched at just 28 days ago. After a couple of weeks, Amazon offered a $489 and $579 prices, a small savings. Today, I’ve noticed that you can save $50 on each on Amazon putting them at $449 and $549. I could stack that $50 from the deal above (because I still have my Palm Pre) and get those prices for $449 and $499. It’s pretty nice to save $100 in less than a month on a product.

However, I’ve recently been looking on Ebay for HP Touchpads and I’ve seen new 16GB go for as low as $380 and 32GB go for as low as $415 – both listed as brand new. Those are bare bottom prices (as of the last few days), but I think with a little patience you may be able to get close to those percentage – maybe pay 5% more to get it quicker if necessary.

At $380, the HP Touchpad is getting pretty tempting for me. As with most larger purchases, I’m going to let this sit and stew a bit, maybe revisit next month. Perhaps a back-to-school special or the cheaper prices on Amazon will cause a trickle effect on Ebay.

What do you think? Do you have a tablet? Do you use it? Let me know in the comments.

Personal Finance Links

January 24, 2011 by Lazy Man Leave a Comment

After my article about How HP/Palm’s webOS can compete on Friday, PreCentral went out and got the specs for the new iPad killer (I’m just joking about the “killer” part.) Anyway, I’m a little wrapped up in the awesomeness of it for today and I hope to work on a couple of side projects, so here are some recent personal finance links to keep you busy. I plan to be back tomorrow with a review of my favorite gift of the holidays – a product that I can say has made an impact to my (and my wife’s) daily routine.

Money Writers: