Out Fox The $treet

According to a report by Canaccord Genuity posted on All Things D, Apple (AAPL) appears to be the only wireless handset maker with a decent profit margin. Incredibly AAPL was able to capture more than a third of the operating margins in the industry. Yet another sign of why market share analysis tends to focus on the wrong measurement. Lots of news lately about Samsung selling more phones in Q3 and of course Google (GOOG) selling more operating systems via the Andriod than AAPL. The ultimate score card shows AAPL with margins roughly double that of Research in Motion (RIMM) and Samsung. Also, notable is that the majority of the operating profit gains since 4Q09 went directly to AAPL. Profits were shifted from Nokia to Samsung and HTC though. By having a limited supply of really good products, AAPL has figured out the holy grail of profit generation. Less is more. Like in investing, the 15th best idea just isn't going to make money like the best idea so why spend time and mon...

Great info from Mark Perry at the Carpe Diem blog . A must read blog for economic data. As Mark points out, corporate profits have not only recovered from the Great Recession in 2008, but they've now soared way beyond the 2007 peak. This chart over laid by the SP500 performance should be standard review in any finance class. Profits peaked back around 1998, but the stock market soared into 2000. On the contrast, profits continue to soar heading to nearly double that of 1998 levels yet the market is still struggling to obtain a faction of the stock prices in 2000. This should undoubtedly prove to any investor that the market is based solely on future profit potential and momentum. Never pay attention to anybody discussing the trailing PE. Utterly useless! Every corporate indicator alone would suggest a booming stock market reaching record highs, but the market struggles some 25% below the 2000 and 2007 peaks. It should also be a warning to those down on the market currently. W...

As corporate profits continue to hit all time highs, thought it was time again to review market valuations. While most investors expect higher year end stock valuations, most only expect modest gains from current levels because the market has run to fast since the March 2009 lows. As we've said on the this blog for the last couple of years, its not wise to use that panic low as a basis for historical measurements and average returns. The market collapsed like never before and should also rebound in a like manner. The SP500 is still considerably below its October 2007 high even though corporate profits have already surpassed those levels. Of course, valuing a market in the vacuum of a single data point can be dangerous. This is why the capitalized profits model factors in the 10-year Treasury Yield to calculate the estimated market valuation. Naturally lower rates should mean higher valuations as stocks become more attractive then bonds. Ironically from the chart below, the SP50...

Coventry Health Care (CVH), Teradyne (TER), Foster Wheeler (FWLT) The market has become increasingly technically driven making investment decisions based on fundamentals virtually worthless. Too many investors feel the fundamentals could collapse with a double dip just as they did in 2008. As I wrote in a previous entry [Coventry Health Ups Guidance - Stock Limps Higher], even a company showing fundamental improvements is ignored by the market. CVH trades at a 7 PE multiple which in normal environments would be 2-3x higher. James Altucher published a piece in the Wall Street Journal highlighting 7 reasons why the SP500 could hit 1,500. Nearly a 40% gain from the current levels. He highlighted several reasons regarding the strength in corporate profits something that is historically important to stock prices. When the market stabilizes, profits will once again become important so its key to understand where the market could go based on current projections. Corporate Profits at Record H...