Out Fox The $treet

Stocks to watch on Wednesday: Slack (WORK) - report after report continues to suggest Microsoft (MSFT ) has become aggressive in pushing Office clients into their competitor to Slack. Teams now has far more users and Slack is facing decelerating growth. My price target remains $17.50 and the chart suggests the risk remains to the downside. FedEx (FDX) - the package delivery company remains a disaster. The stock appears to have more downside risk after another quarter of missing analyst estimates. FedEx is an interesting stock to watch as the company inevitably hits bottom as Europe improves. Disclosure: No position. Please review the disclaimer page for more details. 

Stocks to watch on Tuesday: Aurora Cannabis (ACB) - the stock is headed towards $2 and fast. The cannabis stock has plenty of support around this level, but investors should be careful trying to catch a falling knife.  The stock valuation reaches $2.4 billion, but a lot depends on the amount of dilutive financing needed to fund ongoing operating losses. Kohl's (KSS) - the department store retailer had a mixed report with decent revenues while cutting EPS estimates due to extra costs. The dividend yield is a ridiculous 5.6% after this dip. The stock is now testing the lows from the summer sell off. Slack (WORK) - my previous research questioned valued above $17.50 and the news about top competitor Microsoft (MSFT) adding millions of new Team subs is highly concerning. Previous research: Slack: Wheels Just Fell Off Disclosure: Long KSS. Please read the disclaimer page for more details. 

Microsoft announced an 11% dividend hike and a $40 billion share buyback. The tech giant failed to impress with its capital return plans. The stock isn't likely to see a net payout yield to top the existing 3% level. Don't own Microsoft for this capital return plan, and actually avoid the stock on the negative ramifications of the weak signal. The announcement of a large share buyback might grab headlines and drive a stock higher in the short term, but investors really need to break down the impact before rushing to buy a related stock. The  big $40 billion share buyback  from  Microsoft  ( MSFT ) is a prime example of form over substance. In fact, investors should really question if the tech giant should repurchase shares at these levels and whether this move signals a top in the stock. Read the full article on Seeking Alpha.  More commentary - WhoTrades Disclosure: Long AAPL. Please review the disclaimer page for more details.  ...

In the span of a couple of months, Apple (AAPL) has gone from the first Trillion dollar company to the fourth largest in the US. Amazingly, Microsoft (MSFT) has taken the lead over Amazon (AMZN) and Alphabet (GOOGL) .

Analysts are providing a holiday gift with the constant price targets cuts on Apple. The number of Buy ratings on the stock are at a low since the financial crisis. The actual number cuts aren't that aggressive. The stock trades at only 11.7x FY20 estimates before excluding a large cash balance. Ever since  Apple  ( AAPL ) reported  FQ4 results  back on November 1, analysts have repeatedly come out negative on the stock. The company decided to quit reporting iPhone unit sales and the market hasn't stopped hammering the stock on feared sales weakness. One of the best ways to play analysts downgrading a stock in mass is to take a contrary view and the recent price cut of an ultra-bull is the likely signal that analysts are generally done cutting Apple targets. Read the full article on Seeking Alpha. 

IBM has longed focused on blockchain technology as a distributed transaction ledger of the future. The company continues to expand partnerships and develop a robust platform for enterprise customers. The tech giant is favorably valued for multiple expansion if blockchain becomes the hot technology of 2018. With all of the hype over cryptocurrencies and blockchain in the last month,  International Business Machines  ( IBM ) could make the name change to International Blockchain Machines and see a significant pop in the stock. Such a name change wouldn't be absolutely misplaced either unlike some of the small caps such as  Riot Blockchain  ( RIOT ) that recently made such moves and saw substantial stock gains in a matter of days, if not hours. Read the full article on Seeking Alpha.  Disclosure: Long IBM. Please read the disclaimer page for more details. 

Microsoft announced new capital return plans including an 8% dividend hike. The new stock buyback plan has limited ability to impact the stock considering the surging stock over the last few years. The net payout yield is average for the current market. After the close, Microsoft (NASDAQ: MSFT )  released  that the company will add to the existing capital return program. The total of the share repurchase program is attention grabbing, but investors need to consider whether the amount is actual impactful to the stock. Read the full article on Seeking Alpha.  Disclosure: No position 

The recent downgrade by Sterne Agee on Zynga ( NASDAQ: ZNGA     ) apparently shook out many investors, considering that the company's stock plunged roughly 12% that day. The interesting news about the analyst report is that it provided virtually nothing in the way of news to investors who were paying attention. Zynga continues to be a leading social gaming platform that is struggling to complete a turnaround under new CEO Don Mattrick. While Mattrick came to Zynga from Microsoft ( NASDAQ: MSFT     ) with a ton of promise, he has yet to place his stamp on the company. Zynga has coffers stuffed with $1.5 billion in cash and a strong lineup of game franchises, yet it hasn't done much to innovate in the last year. The company has recently made some moves, including agreeing to accept Bitcoins and releasing an interesting slots game, but investors expect much bigger things out of a heavy hitter like Mattrick. Read the full article here . Disclosu...

The common perception by investors is that Steve Ballmer was a complete failure while CEO of Microsoft ( MSFT ) . Sure he could've done better at developing a mobile software strategy. Sure he could've done better at developing products to compete with Apple's ( AAPL ) slew of consumer gadgets that made billions over the last decade. Investors miss the point, though, that not only did Microsoft perform in line with the other technology powers from the 2000 technology bubble, but it wasn't a product design firm like Apple. Most investors forget that Apple designed the most appealing computer at the time so it was only staying within its core competency by building a iPod, iPhone and iPad. Microsoft though got distracted attempting to make products instead of focusing on developing software to dominate the mobile world. Instead, Google ( GOOG ) now dominates the mobile world with the Android even surpassing iOS from Apple. Read the full article at Seeki...

When Jive Software ( JIVE ) came public back at the end of 2011, the stock promised huge potential to become the social business platform of choice to rival Facebook's ( FB ) consumer network. The cloud software firm instead has floundered as other cloud based software firms have soared. Does this social butterfly have the potential for a similar rebound to what Facebook recently made? Jive Software offers a cloud-based collaboration network that connects employees, customers and partners. It also offers the only pure-play option with the other leading competitor bought by Microsoft ( MSFT ) a while back. Read the full article at Seeking Alpha. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

With the stock price plummeting to 52-week lows, Apple ( AAPL ) should immediately unleash a massive buyback plan. A plan with the size and scope that it materially reduces the shares outstanding and provides support for the stock. Clearly signs exist that the company has exited the massive growth phase of the last decade with a load of competitors constantly attempting to undercut the price and performance of its smartphone and tablet products. Apple though isn't entering a feared phase of flat stock performance similar to the often compared decade of disappear at Microsoft ( MSFT ) . Investors continue to miss the drastic difference between the valuation prospects of both stocks at those starting points. As highlighted a month ago (see Apple s Cash Balances Approaching $150B ), Apple needs to adopt a material plan to absorb the constant cash inflows. The recent success of the buyback program of Yahoo! ( YHOO ) should energize a market that typically frowns on buyba...

The drama for OCZ Technology Group Inc (OCZ) just won't end. The manufacturer of solid state drives has gone through a series of dramatic announcements in recent months from missing earnings due to a NAND shortfall, the retirement of the CFO, the resignation of the CEO, and now an earnings warning and reporting delay. Not to forget that the company hired a new CEO, existing board member Ralph Schmitt. After announcing materially lower revenue expectations, Ralph hosted a conference call that was short on details and long on questions. Due to the lack of firm details, the stock is currently untouchable by investors. Read the full article at Seeking Alpha. Disclosure: Long SVNT. Please review the disclaimer page for more details.

Like so many other social media and technology related IPOs from 2011 and early 2012, Jive Software (JIVE) quickly became very overpriced as the stock soared to $28. The market had huge expectations that far outweighed anything the company could produce. Even beating or meeting all three earnings reports since going public haven't been enough to keep the stock price at those highs. The company is a leading global social business software company. Recently, the stock sold off 22% after reporting Q2 numbers that were mostly in line, while revenue guidance was at the low end of expectations. A stock trading at nearly 10x revenue has to increase guidance in order to sustain that valuation. Read the full article at Seeking Alpha. Disclosure: No positions mentioned. Please review the disclaimer page for more details.

October was an excellent month with a 9.41% gain for this model, but the relative performance was lacking with the benchmark up 10.77%. This was the reverse of the results during the summer swoon, but mostly inline with what would be expected in this large cap model. Stocks with market caps over $10B typically underperform when the market soars. Trades The model had three trades in October. FirstEnergy (FE) was sold as the stock saw decent gains during the summer months hence reducing the net payout yield below normal levels in the model. Typically the model looks to sell when a stock hits 52 weeks high and either buybacks tail off and/or the dividend yield slumps if the company doesn't raise the rate. The other sell was Microsoft (MSFT) since it has reduced buybacks over the year making the stock less attractive. Possibly this was due to the Skype purchase or other potential deals that could be in the pipeline. Regardless the yield dropped to an unappealing level for a cons...

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...

Below are a few updates on the net payout yields of companies in our model that just reported. Always interesting to see what a company did with stock buybacks during a very weak stock market. Chubb (CB) CB reported Q3 numbers after the close on Thursday. The company continues to reduce the outstanding shares as the count has dropped by 30M shares or roughly 10% in the last year. CB was active in the quarter buying roughly 2.5% of the outstanding shares and more impressively at prices over $5 below the current market value of $65.35. Also, the 8M shares repurchased was an increase from the average in the first six months of below 7M a quarter. With a buyback yield of roughly 10% combined with a 2.5% dividend yield, CB maintains a very appeals 12%+ net payout yield. During the third quarter, Chubb repurchased 8.0 million shares of its common stock at a total cost of $480 million (an average of $59.97 per share).  As of September 30, 2011 , there were 6.9 million sh...

When reading through the recent Salesforce.com (CRM) Dreamforce Analyst Session presentation (obtain from the upper right hand corner box), a reader should be constantly struck by the desire to grow at all costs. Both Sales & Marketing and Research & Development costs soared beyond the rate of revenue growth. Another striking point is slide 55 that shows how the FY12 Guidance Midpoint for revenue has increased by $185M or roughly 9% while the Non-GAAP EPS has dropped. Now the earnings drop is mostly associated with the purchase of Radian6, but it further highlights how CRM is buying revenue. Read the full article at Seeking Alpha. Disclosure: Long MSFT. Please review the disclaimer page for more details.

In general my firm is very bullish on companies with stock buybacks and especially ones that contribute to reaching lofty net payout yields (combination of net stock buybacks and dividends). Studies such as  this one  show that buybacks contribute along with dividends to the ability to predict future alpha. Unfortunately the off-the-cuff results from the last 15 months suggest the hardware and communications equipment sub sector of tech doesn't benefit from buybacks, at least in the short run.  Read the full article at Seeking Alpha.  Disclosure: Long AAPL, CSCO, and MSFT. Please consult your financial advisor before making any investment decisions. Please review the disclaimer page for more details. 

This article is the fifth in a  series  focusing on sectors that have struggled to recover from their pre financial crisis levels. Large-cap techs are one of the most hotly debated sectors today. With tech companies like Apple ( AAPL ), IBM ( IBM ) and Oracle Corp. ( ORCL ) trading significantly higher than 2007-08 highs, many investors expect the laggards to catch up soon while others expect them to slowly decline. The sector generally peaked at the end of 2007, so the companies mentioned have been down for over four years now. The sector is also very different from the others covered, since none of the companies were anywhere close to all-time highs reached in the internet bubble of 2000 when the crash started in 2007. Also, while these stocks remain below financial crisis highs, they aren't down as much as the other sectors, partly due to strong balance sheets loaded with vaults of cash. Read the full article at Seeking Alpha.  Disclosure: Long AAPL, CSCO, and MSFT...

Yesterday, Microsoft ( MSFT ) announced a significant share purchase program and an increase to the quarterly dividend. MSFT was up 1% yesterday during a horrible market providing a relative gain against the market of 480 basis points. Very impressive, considering that MSFT didn't annonce better results or a revolutionary product. It was all because MSFT has the financial liquidity to make shareholder friendly moves. This is one of the reasons a net payout yield portfolio can be very attractive. Lets analyze what MSFT announced: Declared a quarterly dividend of $0.13 per share, reflecting a two cent or 18 percent increase over the previous quarter's dividend. Approved a new share repurchase program authorizing up to an additional $40 billion in share repurchases with an expiration of September 30, 2013. Authorized debt financings from time to time of up to $6 billion. Pursuant to the authorization, the company has established a $2 billion commercial paper program. The increase ...