Friday, October 19, 2012

Google Execs selling $280M in shares in September

As reported by Insider Monkey, Google execs were very active on the sales sides in September. Although the informational value of insider sales has diminished over the years, these sales look well timed.

Google Inc (NASDAQ:GOOG) released its quarterly earnings report a few hours early Thursday – by accident, the company claims – and the stock price plummeted 9 percent in just a few minutes in the middle of the trading day, forcing NASDAQ to suspend trading for a period. As the earnings report came out, it was a huge disappointment, as Google Inc. (NASDAQ:GOOG) earnings missed analysts’ estimates by 10 percent, which sent the stock down sharply. However, in the days just prior to the report, three prominent insiders sold off a significant number of shares that totaled more than $280 million, with the chairman of the board jettisoning more than $150 million by himself.

Google Inc. (NASDAQ:GOOG) chairman Eric Schmidt was very active in late September, as he executed 226 transactions in just three days from Sept. 24 to 26, selling off more than 211,000 shares at per-share prices between $742 and $764 per share. He came away with about $158 million.

Other noteworthy insiders are Google Inc. (NASDAQ:GOOG) CEO Larry Page and co-founder Sergey Brin, who had conducted several insider sales in the first half of this month, totaling about $120 million in value and the pair spared themselves about $12 million in combined losses. Brin conducted a series of transactions Tuesday, October 2, selling 83,334 shares at between $750-$765 a share, with a combined value of at least $62.5 million. Page had been selling shares regularly over several days. Starting October 8, he sold 20,833 shares at $754-$762 a share for a value of $15.7 million; 20833 shares at $744-$760 October 9, for a value of $15.5 million; 20,833 shares at prices between $741 and $746 per share October 10, for a value of $15.4 million; and 20,835 shares at prices between $752 and $758 October 11, a value of $15.7 million.

Social gaming business model almost appears to be an oxymoron

Was reading this earlier today over at

Player churn is a big problem for social video games. Companies like Zynga constantly have to work on their retention rates, because players tend to lose interest and stop playing within a short period of time. Just how long does it take for the majority of users to stop bothering with their digital crops? Well, a study conducted by Playnomics from July 1st to September 30th of this year found that around 85% of their United States players lapsed after just one day.
It’s important to note that this statistic only represents the data Playnomics had on hand, and only during that select period of time. Even so, extrapolated to cover for the entire year, it’s a scary look at just how few people actually stick around in social video games for any length of time. Gamasutra explains:
Beyond those first 24 hours, it proved more difficult for developers to keep players around, as 95 percent of all the users in Playnomics’ study stopped playing their new social games by the end of September. In fact, most users tend to fell off within the first three days – after that, it seems they become far more likely to stick with a new title.
This pretty much confirms that social video games are essentially the bubblegum of the industry. Doesn’t really provide any benefit, and they’re nice to chew on for a while, but any flavor is basically gone soon enough.

This is definitely a broken business model and confirms why the chart looks like this

I would be curious to see what other acquisitions the company makes in the future- having recently purchased a board game producer- or how much debt they add to the balance sheet.

High Volume highs 10/19/12

A couple of notable trends in the high volume high screens, small financials continue to hit the lists. In addition, the furniture companies were up on higher guidance. Lastly, there is strength in the in some China share funds.

Morgan Stanley China A Share Fund- CAF
 Ethan Allen Interiors- ETH

First South Bancorp- FSBK
 Stealthgas- GASS

Claymore Guggenheim China Small Cap Fund- HAO

Johnson & Johnson- JNJ

La Z Boy- LZB

Metropolitan Health Networks- MDF

Monarch Financial Holdings- MNRK

National Financial Partners- NFP
 Orient Express Holdings- OEH

Polaris- PII

 Platinum Underwriter Holdings- PTP

Snap-on- SNA

Volume off the high 10/19/12

A lot of larger companies hitting screens today. Investors don't appear to like the guidance with Q3 earnings.

Anacor Pharma- ANAC


Danaher- DHR

Google- GOOG

Government Properties Income Trust- GOV

Huntington Bancshares- HBAN

Iron Mountain- IRM

Western Asset Managed High Income Fund- MHY

Reinsurance Group America- RGA

Universal Forest Products- UFPI

Abbot Labs- ABT

Thursday, October 18, 2012

Google's problems may be worse than just an earnings slip

I am just passing along the information here, but according to reports from CNBC (and mentioned at Business Insider) Google execs may have been calling analysts ahead of the earnings release in an attempt to talk down estimates. Anyone who has been around even a little while knows this is a big Reg FD no, no.

As Business Insider writes.....

CNBC's Jon Fortt reported that, based on conversations with people in the financial community, Google "has been calling around for the past couple of days trying to prepare analysts for this report not to look so great — trying to skew their attention towards certain numbers that might not make this look as bad as it does right now."

Fortt continued, saying, "The fact that they knew this report was going to be an issue, combined with this error apparently on R.R. Donnelley's side is creating quite an issue for them internally."

This story may have just a whole lot more interesting. Then again, it may not.

52 Techniques for finding fraud

Saw this on Old School Value. I knew (and use) most of them, but it is always good to back to basics every now and then.

52 Techniques for Finding Fraud

1. Be alert for misguided management incentives
2. Watch for poor internal accounting controls
3. Question overly liberal accounting rules
4. Watch for qualified opinions
5. Favor companies with conservative accounting policies
6. Be alert for aggressive inventory valuation
7. Consider the significance of pending or imminent litigation
8. Question long term purchase commitments
9. Watch for changes in accounting principles
10. Read the letter from the president with a grain of salt
11. Focus on management and its estimates
12. Be wary when the auditor and/or lawyer resign abruptly
13. Watch for early shipping, before sales occurs
14. Weigh uncertainties of companies’ using the percentage of completion method
15. Look for improper use of the percentage of completion method
16. Check whether the risks and the benefits have transferred to the buyer
17. Determine whether the buyer is likely to return the goods
18. Check if the buyer has financing to pay
19. Determine whether the customer is obligated to pay
20. Watch for hasty recognition of franchise revenue
21. Question how retailers account for returned goods
22. Be alert for revenue recorded on the exchange of property
23. Determine whether management estimates are realistic
24. Watch for the sale of pooled assets acquired in a business combination
25. Be alert for tricks with LIFO pools
26. Watch for gains from the sale of undervalued investments, including real estate
27. Don’t be fooled by profits from retiring debt
28. Adjust for the mixing of gains from recurring and nonrecurring activities
29. Watch for co-mingling of operating and non-operating income
30. Be alert for companies hiding losses as “non-continuing”
31. Watch for the capitalization of start-up costs
32. Consider the propriety of capitalizaing R&D costs
33. Look for companies that capitalize advertising
34. Watch for companies that capitalize administrative costs
35. Question companies that depreciate fixed assets too slowly
36. Be alert for lengthy amortization periods
37. Be concerned when the depreciation or amortization period increases
38. Watch for bad loans and other uncollectibles that have not been written off
39. Be wary of worthless investments
40. Ascertain that cash received has been earned
41. Probe for a troubled company with fixed payments
42. Watch for unrecorded postretirement liability
43. Read debt covenants carefully for contingencies
44. Examine any debt for equity swaps
45. Be wary of companies using subsidiaries for borrowing
46. Watch for defeasance of debt
47. Be critical of successful companies with large reserves
48. Be alert for prepayment of operating expenses
49. Be concerned when the depreciation or amortization period decreases
50. Use cash flow analysis to measure quality of earnings
51. Compare growth in sales with growth in inventory
52. Compare growth in sales with growth in receivables

Tomorrow's volume off the high... today

I guess an intern accidently hit send instead of save on the earnings release....

Quick update on natural gas in storage

Just a quick update on natural gas storage levels. If you are asking, I watch and track natural gas due to the fuel being the primary substitute for coal. As storage levels converge on the average, along with the expectations there of, the price of natural gas will rise, alleviating the substitute effect and increasing the potential demand for coal. The latest natural gas in storage (3,776 Bcf) increased from the week ago levels. However, the weekly storage build rate of 51 Bcf is below the average, resulting in a further convergence.

Natural gas in storage relative to the 5-year average

That said, the rate of the convergence continues to slow.....

12-week slope of the difference between natural gas in storage and the 5-year average

I continue to believe that the largest factor that will contribute to an accelerated contraction of storage levels versus the average will be winter temperatures.