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I Storm CNBC With The Literal Antithesis Of Sell Side Research And I Win Their First Investment Contest By A WIDE MARGIN!

Reggie Middleton's picture




 

Yesterday I appeared on CNBC as they announced that I won their Superbowl themed stock picking contest. The contest involved 15 investment professionals choosing amount 21 stocks. It was light-hearted, but as all who know me can attest, I take everything money related quite seriously. I want to take the time to illustrate why I picked the stock that won - Google, and what was wrong with many of the other picks. Unfortunately, shorting wasn't allowed, for if it was my readers and subscribers know that Facebook (The Truth About Facebook That No Media O…) and Apple (What Sell Side Wall Street Doesn't Understand About Apple) would have been shorted in combination with a Google long that would have produced better returns and less volatility (risk).

As can be seen below, I usually bring my children to interviews so they can watch me pontificate and debate issues on international television.

IMG 20130204 152401

I pulled my 6 year old out of school for her to watch the interview and afterwards we discussed the topics at hand:

  • paradigm shifts
  • the difficulty in analysts and financial professionals seeing shifts in demand and technology
  • network effects
  • unique business models

I took the risk that her 2nd grade teacher wouldn't be covering those topics last period. I mention this because a big focus later on this week at BoomBustBlog is the risk, bubble and burst of the US education system. It will be part four of my education bubble rant and it will be a doozy, not to mention directly related to the way people invest, manage risk and pick stocks and other risky assets. See the first three installments here:

  1. How To Profit From The Impending Bursting Of The Education Bubble, pt 1 - A Bubble Bigger Than Subprime & More Dangerous Than Sovereign Debt!
  2. How To Profit From The Impending Bursting Of The Education Bubble, pt 2 - "Knowledge How", Replicating Grecian Insolvency & Why Most Diplomas Are Depreciating Assets In Real Terms
  3. How To Profit From The Impending Bursting Of The Education Bubble, pt 3: As Bad As Harvard Endowment Funds -0.05% ROI? The Levered Harvard Diploma!

Theses education articles are hard hitting, and unavailable nearly anywhere else on the Web. They contain info and knowledge that effects us all and thus should have literally millions of views, yet they barely have an average following. This, in and of itself, is representative of the state of true learning in the US and a glimpse into the future of our ability to maintain a leadership role in the world economy. 'Nuff said! Now on to the topic at hand...

One thing that I didn't correct the host on was his assertion that Google makes over 90% of its money from advertising and the rest of the stuff was just a hobby. That is a mischaracterization of Google's business model. Google "cost shifts" thus uses advertising to monetize practically everything. Thus, Google makes its money from search, Android and Chrome mobile OS, Gmail, YouTube, etc., but uses advertising to both subsidize low or zero cost product (of very high quality, may I add) and monetize it. Here's a video from the Max Keiser show where I went into the topic in detail...

Another point of interest is the comment by Herb Greenberg, a reporter who has a true analytical bent (I believe he's a CFA) and a healthy pessimistic curiosity of corporate management proclamations. As he said in the video, we are both known for picking apart companies and finding things wrong. While many who don't know better call it perma-bear, as you can see its really known as fundamental analysis. When there's something wrong, there's something wrong. If you look at companies objectively, you not only see what's wrong, but you also recognize what's right. To be absolutely honest, my calls in this stock picking contest were the absolute antithesis of what Wall Street's sell side analysts have been selling its clients. Let's run through the Wall Street sell side mantra, shall we? Trust me, those who don't regularly follow me should click the links below and read the articles thoroughly. While they said...

  1. Buy Apple till $1,000 - What Sell Side Wall Street Doesn't Understand About Apple...
  2. Hurry and get this Facebook IPO while its hot- The Truth About Facebook That No Media Outlet Or Analyst Dare Admit and more to the point, Facebook Registers The WHOLE WORLD! Or At Least They Would Have To In Order To Justify Goldman's Pricing: Here's What $2 Billion Or So Worth Of Goldman HNW Clients Probably Wish They Read This Time Last Week!,
  3. and short Google to go long Apple - My Thoughts on Roger McNamee's View of Google ...

I said the exact opposite! Are the results a coincidence? I'm afraid not! Did A Blog Best Wall Street's Best of the Best In Gauging The True Value of Google? We Have To Think More Like An Entrepreneur & Less Like A Wall Street Analyst. Google is not the only time Wall Street's sell side fell to this lowly blogger. We're at roughly 72 companies/industries/countries/opportunities and counting... Did Reggie Middleton, a Blogger at BoomBustBlog, Best Wall Streets Best of the Best?

Believe it, naysayers and all!!!

My next post will discuss the other stocks in the stock picking contest which fell behind Google. In the meantime, feel free to peruse both my free and subscription Google research:

Google's Q4, 2012: This Looks To Be The Leader Of The New Distributed Information Paradigm

Subscribers should reference page 49 in the "Google Final Report" to see the results of Google's historical investment actions.

I feel that margins may increase slightly but for advertising they are on a long-term downward trend. That is the price Google will pay as digital advertising becomes more ubiquitous. What will be bought at this price? Google will permeate all aspects of digital life with cost-shifted products, based in large part on advertising revenues. In general, margins will drop, but revenues will explode. No longer will we get to keep 40% of our single dollar, but we will get 20% on the $10 dollar revenue bill. While Apple is pondering the Apple TV, Google is working on a wide variety if literally paradigm changing products - many of which are literal game changers: Google Glassdriverless carsGoogle Fiber...

Related articles...

  1. More Evidence That Google Is Already The New Microsoft, and Android Is The New Windows (To YOUR OWN Information)
  2. Cost Shifting Your Way To Prominence Using The Network Effect, Or Google Wins - Apple, RIM & Microsoft Have ALREADY LOST!
  3. As Lower Margin, High Price iPad Minis Outsell All Other iPads The BoomBustBlog Apple Margin Compression Theory Is Incontrovertible & Mainstream
  4. Real Numbers That Show Why Facebook's Ad Model Means Google Will Put It Out Of Business

Industry Leading, Subscription Based Google Research

All paying subscribers should download the Google Q1-2012 Valuation Summary wherein we have updated the valuation numbers for Google using a variety of metrics. Click here to subscribe or upgrade

A couple of bits from our archives...

The table of contents outlines how we have broken Google down into distinct businesses and identified both the individual business models and the potential revenue streams, as well as  valuation for each business line.

Page 57 of the analysis shows a sensitivity table which outlines the various scenarios that can come into play and how it will change our outlook and valuation opinion.

Professional/institutional subscribers can actually access a subset of the model that we used to create the sensitivity analysis above to plug in their own assumptions in case they somehow disagree with our assumptions or view points. Click here for the model: Google Valuation Model (pro and institutional). Click here to subscribe or upgrade.

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Wed, 02/06/2013 - 14:58 | 3220792 Brokenarrow
Brokenarrow's picture

cnbc has done more to harm old people than Hitler, Stalin, Pol Pot, and Bin Laden combined. They are the minions of deception, dedicated to robbing the naive and poor. Remember Kevin Krimm? Karma. No doubt. I'm certain more is to come.

Wed, 02/06/2013 - 14:51 | 3220760 hooligan2009
hooligan2009's picture

looking very sharp reggie..

i admire your stamina having to sit amongst a bunch of cracker talking heads whose iq and shoe size coincide.

i am a (straight) 6'4 cracker with a (broken) big nose by the way, heh

Wed, 02/06/2013 - 14:28 | 3220664 smartstrike
smartstrike's picture

Jim Cramer must be genius. I remember when he was touting it back in 2006-2007 when it was only $400-500.

Wed, 02/06/2013 - 14:06 | 3220576 Au Shucks
Au Shucks's picture

Reggie is among a VERY few analysts who actually know what the hell they're talking about because Reggie actually WORKS for a living.  Great work RM, as always.

Wed, 02/06/2013 - 13:43 | 3220493 hannah
hannah's picture

reggie - doesnt it kinda make your skin crawl to be on russian tv. truth or not, it is a anti-usa propaganda machine. so you get face time and get to look more professional by being 'on tv' but doesnt it just make you vomit a little that this is what it takes for you to get ahead......?

Wed, 02/06/2013 - 14:11 | 3220596 11b40
11b40's picture

Are you serious?  What makes my skin crawl is the propaganda being spoon fed to the mindless zombie audience 24/7 by the corporate media world of the good old USofA.  

Please tell me what/when/where RTV has been wrong in their programming.  I don't watch it often, but the litlte I have seen has been accurate, in my opinion, and certainly offers some alternatives to the pablum on CNBC....and waaaaay more honest than FOX and less biased than MSNBC.

Wed, 02/06/2013 - 20:28 | 3221798 hannah
hannah's picture

the old 'the other choice is just as bad' arguement. so being a traitor is ok because other people are traitors....?

Fri, 02/15/2013 - 15:58 | 3247455 11b40
11b40's picture

Traitor?  Yeah, whatever you say, Hannah.

You want to see traitors, just turn on your TV.  They are walking the halls of Congress, sitting on the Supreme Court, running multi-national corporations and banks.

And just to piss you off even more, far better coverage of International news is available on Al Jazeera.  Check it out sometime if you ever want to take a trip out of your parochial mind.

Wed, 02/06/2013 - 13:36 | 3220472 mirac
mirac's picture

Congrats on the win-saw you on TV too...but despite Google's innovation there are many problems facing the markets. Advertising dollars and disposable income won't hold up.  Google can go much cheaper than it is today.

Wed, 02/06/2013 - 13:07 | 3220360 Dr.Awkward
Dr.Awkward's picture

Great job, Reggie.  I always look forward to your posts as you clearly recognize the importance of simple, fundamental research and analysis. 

1) Can I call you Super Dad?

2) Can I buy you a drink?

Wed, 02/06/2013 - 14:04 | 3220568 11b40
11b40's picture

Having been a Reggie fan for several years, what I sense in him is a healthy dose of somthing that is missing in so many others today - honesty and integrity.  He truly takes pride in his work, and he works hard to preserve his reputation.  No one will be right every time, but if his signature is on the doc, you can bet that a lot of thought has gone into it and the result is what he believes to be correct.

Wed, 02/06/2013 - 14:24 | 3220646 Dr.Awkward
Dr.Awkward's picture

Amen, he definitely stands behind his words.

Wed, 02/06/2013 - 13:06 | 3220327 ebworthen
ebworthen's picture

Good Job Reggie.

And only two of the stocks that anyone picked were in the green!

And Mandy Drury picked Facebook, LOL!  Mandy, Mandy, Mandy.

Wed, 02/06/2013 - 12:41 | 3220277 Mercury
Mercury's picture

Well done Reggie.

Nice of CNBC to give a few seconds of air time at the end there to the guy who actually won the contest.

 

Wed, 02/06/2013 - 12:25 | 3220222 Grin Bagel
Grin Bagel's picture

Congratulations Reggie, and thanks for your openess to small investors. God's speed to your creativity.

Wed, 02/06/2013 - 11:14 | 3219951 markettime
markettime's picture

Nice work Reggie, I might have to start taking your posts more serious now. 

Wed, 02/06/2013 - 12:32 | 3220239 Ignatius
Ignatius's picture

And he takes his children to work to learn first hand 'what Daddy does.'

This is real education as opposed to the schooling most of us get.

Good on you, Reggie.

Wed, 02/06/2013 - 11:05 | 3219922 Dan Conway
Dan Conway's picture

Reggie, you know they won't invite you back because you didn't buy crapple. 

Wed, 02/06/2013 - 10:54 | 3219888 WaEver
WaEver's picture

still waiting for the french bank run

Wed, 02/06/2013 - 12:57 | 3220335 richard in norway
richard in norway's picture

You didnt make money shorting french banks 18 months ago or you didnt make enough before they started shoveling euros into the banking system to prop it up. I made money shorting french banks, i have no complaints

Wed, 02/06/2013 - 10:45 | 3219843 resurger
resurger's picture

GZ Reggie

Wed, 02/06/2013 - 10:41 | 3219826 Grand Supercycle
Grand Supercycle's picture

Get Ready Bears.

Wile E. Coyote overdue sell off awaits as SPX daily & weekly charts continue their protracted topping process from current extreme levels.

http://trader618.com

Wed, 02/06/2013 - 10:35 | 3219798 Lendo
Lendo's picture

Awesome.  Good for you Reggie.

 

Wed, 02/06/2013 - 10:32 | 3219785 Stuck on Zero
Stuck on Zero's picture

Brag. Gloat.

 

Wed, 02/06/2013 - 12:36 | 3220258 thisandthat
thisandthat's picture

And that's why you're Stuck on Zero

Wed, 02/06/2013 - 11:21 | 3219978 homersimpson
homersimpson's picture

What - you one of those folks that incorrectly ripped Reggie for believing he shorted APPL the past few years even though he kept saying over and over he didn't short APPL the past few years?

Better his "brag/gloat" than your worthless hate.

GREAT job Reggie. Making the C in the CNBC stand for "clowns".

Wed, 02/06/2013 - 10:45 | 3219842 Pool Shark
Pool Shark's picture

 

 

It ain't braggin' if you can do it...

 

 

Wed, 02/06/2013 - 13:58 | 3220544 11b40
11b40's picture

It ain't braggin' if you can do it...and Reggie keeeps on doing it!

Wed, 02/06/2013 - 11:12 | 3219946 Pladizow
Pladizow's picture

"Be a contrarian or a victim." - Rick Rule

Wed, 02/06/2013 - 13:05 | 3220358 ebworthen
Do NOT follow this link or you will be banned from the site!