Vetr Blog

Crowdsourced price predictions for the stock market.

Vetr Blog August 13th Citi and Apple

The Crowd at Vetr has always been a little jaundiced of the
bank stocks as they don’t see that much innovation in the sector and harbor
feelings from 2008, so they believe that $56.90 is a fair price for C. The
Analysts are looking much more bullish at $64.27 which would be huge pat on the
back for present management, with C’s bad bank now coming good could the
analyst’s be correct for a change.

Merrill Lynch analysts have changed their rating to agree
with The Crowd at Vetr.com. Last week the analysts downgraded their rating down
from $142 to $130 just below Vetr.com’s crowd at $133.33. The crowd here feels that
the watch is a bust or just not taking off as quickly as it could have. Was it
a PR blunder to launch the $10K version so quickly?

Check or post ratings at Vetr.com today!

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Vetr Blog August 12th 2015

The Crowd at Vetr.com is still bullish on #yhoo as we
believe that they still have a great story and can do a lot with an aggregate
prediction of $39.79. This compares to the analyst price of $53.81 at the time
of writing. Considering the reports today of the Baba share price in The WSJ it
would seem that the crowd is more likely correct. This is also reflected with
the Baba price as well. Crowd coming in at a modest bull on $83.87 compared to
the analyst at $107.49  

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Berkshire Hathaway: Slow and Steady Wins the Race

We’ve written in previous posts about the decidedly tech-heavy preferences of Vetr.com users. Nine of our top ten stocks in terms of number of ratings are technology firms – ten if you count Tesla ($TSLA – while tech stocks totally dominate Vetr.com watch lists.

However, it’s not a tech stock that is watched by the most Vetr.com users. It’s an ETF.

Specifically, the SPDR S&P 500 ETF ($SPY), which tracks the S&P 500 Index. This security is watched by more than 500 Vetr.com users, which is roughly 50% more than the 328 watching #2 Apple ($AAPL).

Meanwhile, only a mere 20 Vetr.com users are watching Warren Buffet’s Berkshire Hathaway ($BRK.B). The company, run by arguably the most famous (and successful) investor who has ever bought or sold a stock, has one lone rating (a buy).

It seems Buffett and Berkshire are off the radar when it comes to our users.

This is somewhat understandable. Vetr.com users are generally younger and can identify much more readily with social media, networking and other technology stocks than they can with conglomerates run by an octogenarian. Moreover, tech stocks are hot and volatile, zooming up (and down), post truly fantastic growth numbers, and get all the press. And there is no denying the sheer scale and disruption wrought by a many of the technology companies represented so well by our users’ watch lists and ratings ($AAPL, $FB, $YHOO, $GOOG, etc.). By and large, blue chip tech stocks have been a good place to put money to work.

Yet it is also interesting, given that the #1 most-watched security on Vetr.com is a broad market ETF designed to clone the performance of the S&P 500, that Berkshire is practically ignored. Why? Because in terms of compound annual per-share price performance, Berkshire Hathaway beats the S&P 500 by a factor of more than two – 21.6% to 9% since 1965.

This weekend, Buffett released his annual shareholder letter, an annual exercise that, over the years, has probably taught more people about fundamental investing than any broker, course or seminar. As usual, it is filled with wisdom gleaned over buying low and selling high for fifty years, solidly outperforming generations of professional money managers.

The takeaway is that portfolio performance is best measured in decades, not months or even years. Since 1965, Berkshire Hathaway’s overall share price gain has been an eye-popping 1,826,163%, while the S&P 500’s, including dividends, has been 11,196%.

Talk about outperformance.

Popular stocks come and go, and sector fads can burn very brightly before they fizzle (remember RFID?). Investors like Buffett know how to consistently make money in any market, regardless of which sector or new fad dominates everyone’s attention, because they focus on long-term fundamental drivers of value. It is the science of investing versus the thrill of speculation.

The lesson from old story of the tortoise and the hare was that slow and steady wins the race over the long haul. Berkshire certainly has. The stock isn’t followed by many Vetr.com users yet, but maybe it should be.

Buffett’s latest letter is freely available at http://www.berkshirehathaway.com/letters/2014ltr.pdf.

FireEye: Overvalued Former High-Flyer or Strategic Cyber Stock?

It is no surprise that technology stocks command the greatest attention from both Wall Street analysts and Vetr.com users. After all, growth is where the gold is, so it is no coincidence that nine of our top ten stocks in terms of ratings are technology firms. The outlier, Tesla ($TSLA), is as much a tech stock as an automaker can be, but since it actually makes cars, we can’t really count it. Otherwise, it’s a sweep.

Wall Street is not much different. The nine tech stocks in our top ten are followed by an average of no less than 31.7 professional analysts, which is a whopping degree of coverage considering the average listed stock in the U.S. has none.

When it comes to actual ratings, Vetr.com users are a normally a little less rosy-eyed than their Wall Street counterparts. Our most-rated stock, Apple, actually has more bearish ratings than bullish ones, a trait shared by a further four of our top ten. Generally, our users reflect a balance between bullish and bearish opinions, whereas Wall Street analysts are almost uniformly bullish when it comes to blue-chip tech stocks. Perhaps that age-old conflict of interest isn’t eradicated after all.

We’ve pointed out numerous examples of this divergence in previous posts, but this week we want to discuss FireEye ($FEYE), a fast-growing provider of cyber-security solutions to enterprises and governments. FireEye is our 10th most-rated stock, with 25 active ratings, and it is tracked in 21 watch lists. This is fairly significant, since three months ago the stock was barely followed on our platform.

However, only a mere seven of our 25 ratings are bullish, against 18 bearish. Despite being in one of the hottest sectors on the Street, our users rate the company a collective yawn; the six-month average price target is $48.72, only 5.5% away from Friday’s closing price.

Meanwhile, 20 Wall Street analysts follow FireEye. 14 rate it a buy, 12 a hold, and one lonely soul actually rates the stock a sell. Interestingly, we’d be willing to bet the majority of those hold ratings used to be buys until $FEYE’s share price fell out of bed last March and cratered from $97 to $27 in three months. The selloff was a textbook example of a high-flying, high-growth, high-multiple momentum stock running out of steam.

The question, of course, is whether our users’ bearish opinion on $FEYE is warranted at current prices. On the one hand, our gang is a pretty tech-savvy group, so we wouldn’t dismiss the pessimism right away. On the other, you only have to scan the headlines to know that cyber-security is red-hot, so we wouldn’t necessarily believe it either. Indeed, $FEYE’s 150% quarter-over-quarter revenue growth suggests the cyber-security sector is growing like a weed.

What do you think? Is FireEye an overvalued momentum darling unlikely to ever see it’s old highs again, or is it worth every penny because of the long-term potential of cybersecurity stocks? Make a rating!

Dalio’s Bridgewater Slices Apple, Adds to Microsoft

This time of year is filing season for hedge funds and other institutional investors with over $100 million in assets under management. They must disclose certain portfolio positions on quarterly 13F filings with the SEC with 45 days of the end of the preceding calendar quarter.

The 13Fs due mid-February each year are particularly interesting, since they contain portfolio adjustments made in the final three months of the prior year. While these filings are anything but real time, they nonetheless provide some intriguing insights into what some very savvy folks are thinking.

For instance, Bridgewater Associates, the largest hedge fund in the world with $160 billion under management, added significantly to its position in Microsoft ($MSFT) while selling fully half of it’s 535,000-share stake in Apple ($AAPL). This is curious, since the former has been a ho-hum performer while the latter recently became the most valuable company in history. In fact, $AAPLis up 15% already year-to-date, while $MSFT is down nearly 6%. Ray Dalio, head of Bridgewater, clearly felt it was time to take some chips off the table. Interestingly, Dalio added to commodity plays in the quarter, particularly Brazilian energy fund Petrobas ($PBR), GoldCorp ($GC) and fertilizer company Potash ($POT).

Among Vetr.com users, Apple remains our most followed stock, watched by over 300 of our users. But especially after $AAPL’s run so far this year, 47 of the 69 active ratings we have on Apple are now bearish, versus only 22 bullish, and the 6-month target price is three points below the company’s $127 closing price today.

In other words, the most valuable company in the world is now an outright sell, at least in the aggregate opinion of our users.

Meanwhile, Microsoft is rated a buy on Vetr.com, with 20 of 24 active ratings on the stock bullish and only 4 bearish, although the $45.29 average price target for $MSFT is only a few points higher than the current quote. All told, Vetr.com users seem pretty supportive of Mr. Dalio’s decision to halve his $AAPL position and dramatically increase his fund’s exposure to $MSFT.

Hedge fund titans didn’t become that way buy buying high and selling low, so Bridgewater’s steps are not that hard to understand given the price performance in $AAPL over the past few years. As the old saying goes, no one ever went broke taking a profit. The Microsoft purchase is a little harder to grasp, but we have also learned never to underestimate the contrarian instincts of consistently successful hedge fund managers. This time around, Vetr.com users appear to to feel the same way.

Oil Challenge Update: A Bearish Tilt

The decline in the price of crude oil has been front and center on investor’s minds since the end of last year, and equity prices continue to key off movements in oil’s price. The collapse of crude has decimated the share prices of energy companies, slashed CAPEX budgets in 2015 and generated layoffs across the sector. They key question: Where does crude oil go from here?

Two weeks into our Oil Price Challenge, Vetr.com users have put up 53 predictions on where they think the price of West Texas Intermediate will be at the end of the day March 31st. Although still a relatively small sample size, looking at the data to date reveals some interesting statistics:

Of our 53 ratings to date, 35 were bullish forecasts when they were made, compared to 28 that were bearish. In other words, the predicted price was either above or below the price of oil at the time of the rating. This is perhaps unsurprising, since oil had already fallen precipitously when we started the contest on January 26th and it is fairly common for Vetr.com users to rate counter to a security’s immediately prevailing trend. Nonetheless, the near-parity of opinion at the time of rating suggests at least the expectation of a bottom forming in the near future.

Of course, crude oil’s rebound off the lows of January have shifted these numbers around somewhat. As of this writing, 27 of our ratings remain bullish, i.e. they are still above the current $51.67 per barrel quote, while 36 targets are now below it. As a group, the average prediction among Vetr.com users is for WTI crude to close at $47.03 per barrel on March 31st, while the median rating is $47.55. Meanwhile, the range of predictions is bordered by very pessimistic $30 per barrel on the low end and a ragingly bullish $77 on the high end; interestingly, both bookend ratings are roughly an equal distance (42% and 49%, respectively) away from the current quote.

For what it’s worth, a recent Reuters survey of 33 economists and analysts expect the price of Brent crude oil to average $58.30 per barrel in 2015 (Brent crude usually trades for a small premium over WTI).

As a reminder, Vetr.com’s oil price contest will award a pair of Beats headphones to the user with the closest prediction as of 5:30 PM EST on March 31st, 2015. Predictions can be entered and modified up to February 28th, after which they will be locked. Check out the details here.

Netflix: Is the Show Just Getting Started?

It isn’t often that famed investor Carl Icahn admits a mistake, but that is exactly what he did while on CNBC last week. The subject of his mea culpa? Netflix ($NFLX), a company that has essentially done to the entertainment sector what Amazon ($AMZN) has done to the brick-and-mortar retailing business. Icahn took significant profits in $NFLX profits in late 2013 after the stock had risen sharply, against the advice of his son and co-manager Brett. Since then, the price is up another 20%, spiking sharply over just the past few weeks on strong subscriber growth, improved profitability, award-winning original content and big plans for international expansion.

As has been the case since $NFLX was founded in 1997, the company’s fortunes are essentially anchored to basic subscriber growth. Whenever growth in subscriber numbers have stumbled, the stock has gotten hammered; when it surges, the stock soars, even if there are concerning fundamental metrics like contribution margin slippage. Case in point: the company’s latest quarterly release beat expectations in terms of sub growth, sending investors into a tizzy and the stock roaring upward, but the numbers also showed declining per-sub profitability in the key streaming segment.

For any business predicated on ever-greater numbers of users, the percent of each dollar in subscription revenue that makes it to the bottom line is a key metric. Given the scale of Netflix, with 57 million customers worldwide, it’s not surprising that eventually, it becomes incrementally more expensive to attract new users. That’s not surprising. Yet overall, there should be increasing leverage in a subscription-based model, as fixed expenses are spread across greater numbers of revenue-generating customers, not the other way around. In this case, profitability seems to eroding among new streaming subscribers, Netflix’s most important segment (the DVD rental business is eventually going to disappear). Plus, the company announced plans to spend a tremendous amount of money to expand internationally, potentially a worrisome combination if the profitability of the users generated from that expansion is low.

Nonetheless, Wall Street, and investors in general, are enamored of $NFLX; of the 40 analysts covering the stock, 16 rate it a buy. However, another 20 rate it a sell, probably on valuation grounds; there is no doubt the stock is growing quickly and is extremely successful at what it does, but is it worth a forward Price-Earnings Ratio of 75 and nearly five times annual sales? Vetr.com users, as usual, are a bit more skeptical – of 26 active ratings, we have 14 bullish and 12 bearish, and the average 6-month price target of $460 is only 4.3% higher than the stock’s current quote. What do you think? Where will $NFLX be six months from now? Make a rating!

LinkedIn: Priced to Perfection?

For some folks above a certain age, social media can be a bit of a riddle. It’s not that the technology itself is especially difficult to master –apps are usually very easy to operate – but that there isn’t always an immediate answer to the question “why?”

LinkedIn ($LNKD), though, is one of the exceptions. Almost unique among social networks, LinkedIn’s value is immediately clear to even the least-adept social networking Luddite. The company has become enormously successful by essentially creating a web interface around the age-old concept that everyone is connected to one another at some level though their mutual contacts. Brilliant.

The company was one of the first of the mega-social sites to IPO, coming public at $93 in May 2011, and it rose fairly steadily over the next two years. But it’s been a wild ride since then; the stock cratered from its high of around $250 in September 2013 to a low last May of $150, and has surged back up to its current quote around $232.

Despite the volatility, Wall Street remains unabashedly bullish on $LNKD. According to Thomson/First Call, A total of sell-side 36 analysts follow the stock, of which 28 are buys, 10 are holds, and zero are sells.

In contrast, Vetr.com users – generally a pretty tech-savvy bunch – are essentially split on the company. $LNKD earns only three stars on our platform, which translates to a “hold”. Of 15 active ratings, eight are bullish and seven are bearish. Interestingly, however, even our bulls are not that excited; the average 6-month target price for the stock is $235, a mere 1.17% upside from today’s closing quote.

Bulls on the stock cite LinkedIn’s rapid growth, low valuation in comparison to quasi-competitors Facebook ($FB) and Twitter ($TWTR), and high recurring revenue from the company’s software-as-a-service business model. Bears, on the other hand, note that growth is not translating to the bottom line, the stock is priced to perfection, and insiders are selling. In either case, the company has a dominant position in one of the best real-life applications of social networking. The question, as usual, is whether the stock’s price already reflects it.

Where do you think LinkedIn’s price will be six months from now? Make a rating!

Alibaba: A Good Entry Point Ahead of Earnings?

In the few short months since its record-setting $25 billion IPO, Alibaba Holdings ($BABA) has become very popular among U.S. investors. It is already the fifth most widely-held stock in TD Ameritrade client portfolios, no mean feat given $BABA is a Chinese company relatively unknown in the U.S. outside Wall Street.

The stock’s popularity is for good reason. Alibaba is the largest online commerce company in the world, with hundreds of millions of users interacting with millions of merchants every day. As with most things Chinese, the scale is massive and hard to understate; transaction volume on$BABA’s sites reached $295 billion in sales in 2014, more than eBay ($EBAY) and Amazon ($AMZN) combined. Sales growth, as you’d expect, is very robust; revenue in the third quarter climbed 54% year-over year. And to think online shopping penetration in China is still less than 50%…

The stock has rapidly become a darling among Vetr.com users as well. It earns four stars, with 50 active ratings on $BABA on the platform. Of these, 42 are buys, three are holds and five are sells. For its part, the Wall Street establishment is even more bullish on $BABA than our users are, with 32 buys, three holds and zero sells (undoubtedly a function of that IPO we mentioned earlier).Vetr.com users have an average 6-month price target of $124, some 24% higher than the stock’s current levels of $99.58. Fundamentally, though, the stock is anything but cheap…but then again, rapid growth never is.

Alibaba reports quarterly earnings on Friday, February 13. The market is looking for revenue of $4.45 billion and earnings per share of $0.75 per share, and all eyes will be on the company’s user metrics. Meanwhile, $BABA is aggressively going after China’s 600 million mobile phone users and using some of its IPO windfall to invest heavily into such areas as payment platforms, digital media and financial services. Despite the outlook, $BABA has fallen off from its post-IPO surge, dropping from $120 per share back in November and breaching the psychologically key $100 mark during an admittedly weak few days of trading in New York.

What’s your take on $BABA? Will the earnings release in a few weeks propel this stock higher, or does the current price already reflect Alibaba’s fantastic growth? Make a rating!