Fog of War and tech earnings previews
From the markets reaction to the Ukraine/Malaysia/Gaza wars and escalating currency and economic wars between Putin’s Russia and the Republican/Democrat Regime’s US, you’d think they’re meaningless. Fog of war makes them important potential Black Swan events.
The fog of war (German: Nebel des Krieges) is the uncertainty in situational awareness experienced by participants in military operations. The term seeks to capture the uncertainty regarding one’s own capability, adversary capability, and adversary intent during an engagement, operation, or campaign.Black swan is an unpredictable or unforeseen event, typically one with extreme consequences.
Most important movie you can watch this week is Fog of War in which Robert McNamara gives us the lessons he learned when he was Secretary of Defense. Here are a few clips from it.
Be careful about war. Always.
We’re in the midst of another earnings season, so let’s run through some of the portfolio position’s upcoming reports with a preview and some analysis.
Apple reports after the markets close today.
Earnings report set-up for $AAPL bulls: Stock is very cheap and a favorite of insitutions/fund managers. That won’t change no matter what the report is tonight. iPhone has been stronger than expected it would be the last three months. Stock is still hated by day-traders and speculators who still feel burnt the last time it got up to these levels two years ago. There are all bullish points.
Earnings report set-up for $AAPL bears: Stock’s had a huge recent run but lately been exhausted below its all-time highs. Analysts have raised their iPhone sales numbers already. Stock is “over-owned” by institutions/fund managers. These are the bearish points into the call.
Net/net: The contrarian in me says that the catalyst for any $AAPLmovement tomorrow is simply how big a beat (or miss?) on top and bottomline $AAPL delivers tonight. Too many headlines saying “Earnings don’t matter for $AAPL this time”.
Facebook reports after the market closes tomorrow.
Earnings report set-up for Facebook bulls: Facebook’s ad strategies, especially with video, are likely paying off huge and catching lots of traction without hurting (or perhaps even helping) the amount of time users are using their apps. The Internet set, Facebook.com, is at this point, an afterthought in the report, which is exactly why I’ve owned FB since the low $20s, as our vision of it becoming the leading App Revolution pureplay app stock has come to fruition. The short-term traders seem to be either short already or waiting to see if FB can get through its all time high above $70 before they cover and/or start buying this stock. And FB, unlike Apple, is still very under-owned by institutions/money managers.
Earnings report set-up for Facebook bears: The stock has had a big rally in the last week as we head into earnings and the bar is set very high for this report after a string of blowout reports that made analysts scramble to raise their numbers.
Net/net: I’ve owned FB common since the $20s and I trimmed a small tranche of FB the first time it got up to $70, as it has been pretty much my largest position for the last couple years. I expect a blowout report and a small pop in the stock afterward. If FB’s earnings report isn’t blowout, it’s a good 10-15% downside after the report. So I sure wouldn’t want to be trading it overly aggressive but as an investor, I think there is still 5x upside from $70 over the next five to ten years.
Amazon reports on Thursday after the close.
Earnings report set-up for Amazon bulls: This stock has become hated by the momentum traders since falling from the $400s, and that reminds me of how Apple was hated by the traders back at $70 just a few months ago. The buzz around the earnings report is nil and the bar is not set high after a couple of disappointing recent earnings reports.
Earnings report set-up for Amazon bears: Will this be another quarter that the company neglects to grow margins sustainably enough to make real money for shareholders? Competitors like Zulily are aggressively coming after Amazon’s core business and will other delivery services keep margins down once again?
Net/net: More questions for the bears than the bulls heading into this report. That said, you can never really be sure what will cause Amazon to spike or crash immediately after an earnings report, as sometimes it’s earnings and margins that matter and other times it’s topline growth. If the company mentions their new all-you-can-read Kindle book pricing as catching big traction that could pop the stock. Amazon’s become by far the easiest way to shop for things if you don’t live in a huge metropolis and that de facto standard shopping destination accomplishment is the most important reason why I’ve owned and continue to own this stock for the long-run.
