Facebook lists this week and will have a material impact on near term direction of a large part of Nasdaq and its constituents valuations; that is current valuations will either be confirmed or deflated. Barron’s went negative on the weekend as have much of the international media already. Reply

With the FB IPO imminent, investor frenzy continues to grow. Given all of this interest, the stock may be a short term trading winner. Over the long haul, the IPO valuation does not leave a lot of room for investors.

That sentiment is reflected in the well known Graham quote — as far as emotional in the minute voting goes, the stock could see a hefty pop from the IPO price of $32. Consider this about the frenzy: Private investors who bought in during the last round paid 25% more than the IPO price.

That doesn’t mean this won’t bounce on the IPO. I cannot predict the madness of the multitudes, but a 30, 40, even 50% pop on the opening is not unthinkable.

There are a universe of fund managers I expect will have to own this. Despite the simple fact that at the IPO price of $32, FB stock will be 6 times as expensive as Google (GOOG), and 8 times what Apple (AAPL) shares cost.

Here’s Barron’s:

“Despite all the excitement, investors would do well to skip the deal. Facebook’s shares will be richly priced, both in absolute terms and relative to the stocks of established growth companies Google (GOOG) and Apple (AAPL), as Barron’s argued in February when Facebook filed for its IPO (“At Long Last Facebook,” Feb. 6).

If the deal is priced at $35, Facebook will be valued at around 70 times projected 2012 earnings of 50 cents a share and 18 times estimated revenue of $5 billion.

In contrast, Google, at $610, trades for less than 15 times 2012 profit estimates and under six times revenue. At $570, Apple shares have a 2012 P/E of just 12 and the company’s sales have been growing more rapidly than Facebook’s despite a revenue base that is 40 times larger. The effective P/Es on Google and Apple are even lower when factoring in their huge cash hoards. Facebook also will have plenty of cash—an estimated $9 billion—after its IPO.”

I wonder: Who is doing all the clamoring for this stock: Mon & Pop oon main street, or finance pros (term used loosely) who want a piece of FB?

We will find out soon enough . . .


Goldman dials back risk, profit falls Reply

(Reuters) – Goldman Sachs Group Inc (NYS:GS – News) posted a 23 percent decline in quarterly earnings after it dialed down risk-taking in tricky markets, and clients also reduced their appetite for bets.

The results show just how much the new regulatory environment, as well as recent market tumult, are spurring Goldman Sachs to take less risk. It is a real turnabout for the bank, which in the years leading up to the financial crisis was one of the most aggressive on Wall Street.

A measure of Goldman’s risk-taking fell 16 percent from the same quarter last year and 29 percent from the fourth quarter. The bank said it was boosting its dividend, which to some analysts is a signal that it sees fewer opportunities for making money in markets.

“We have been cautious on risk and we remain cautious on risk given the environment,” Goldman Chief Financial Officer David Viniar said on a conference call Tuesday morning. “And I think that is also reflective of the fact that our clients have been cautious on risk and remain cautious on risk.”

As part of its de-risking strategy, Goldman sold $2.5 billion worth of its stake in Chinese bank ICBC (HKG:1398.HK – News) this week. Goldman has held a stake in the bank since 2006, but theinvestment has been a volatile one in recent years, alternating between quarterly gains and losses of $905 million and $1.05 billion, respectively, since 2010.

Goldman’s ICBC investment is now worth just under $2 billion, Viniar said, describing the stake reduction as “purely a de-risking sale” because it had gotten too big.

In fixed income, currency and commodities trading, one of the biggest sources of profit for the bank over the last decade, Goldman highlighted interest-rate products as a bright spot and said other major businesses reported lower revenue.

In another move that made the Wall Street firm look a little more like a run-of-the-mill commercial bank, Goldman raised its dividend 31 percent to 46 cents per share.

It is only the third dividend increase since the bank went public in 1999. It last raised the dividend in 2006. Goldman executives have repeatedly said they prefer using capital for business investments, or returning money to shareholders through stock buybacks.

The decision to raise the dividend came after pressure from shareholders, Viniar said, but management expects buybacks to be “the predominance of our capital management activity.”

The bank spent $362 million to buy back 3.3 million shares during the first quarter, on the heels of a $6 billion buyback program in 2011. Management is authorized by Goldman’s board to repurchase another 60.3 million shares.

Goldman’s new dividend represents a payout ratio of 27 percent of its average earnings over the past four quarters.

Its chief Wall Street rival, Morgan Stanley (NYS:MS – News), pays a quarterly dividend of 15 cents per share, which represented 54 percent of average 2011 quarterly earnings. Morgan Stanley, which reports first-quarter results on Thursday, has said it will not increase its dividend in the near term because it plans to use capital to buy a greater portion of its Morgan Stanley Smith Barney joint venture with Citigroup.

But JPMorgan Chase (NYS:JPM – News) and Wells Fargo & Co (NYS:WFC – News) both recently raised dividends when announcing first-quarter results. JPMorgan’s upcoming quarterly dividendof 30 cents per share represented 27 percent of average earnings for the past four quarters. Wells Fargo’s dividend of 22 cents per share represented an average payout ratio of 30 percent.

Bank of America Corp (NYS:BAC – News) and Citigroup Inc (NYS:C) pay nominal dividends of a penny per share.

Goldman’s shift toward a lower risk profile comes as investment banks have found their profits under pressure from continued stress in the capital markets. New U.S. regulations are aiming to limit risk-taking at the biggest banks, through measures including higher capital requirements, restrictions on trading, and curbs on investments in hedge funds and private equity.

But investors had been expecting Goldman to find ways to increase profitability and post even stronger results, especially after JPMorgan and Citi outperformed expectations in the first quarter.

Goldman’s revenue from fixed income, currencies, and commodities was $3.5 billion, down 20 percent from a strong year-ago quarter but more than double the fourth quarter. UBS analyst Brennan Hawken described the revenue as “light” against his forecast of $4.2 billion.

Revenue was down across most of Goldman’s businesses compared with a year earlier, except for financial advisory and stock trading for clients.

Its investment management division was perhaps the weakest business, reporting net outflows and lower revenue. Analysts had expected gains at money-management firms across Wall Street because of a stock market rally during the first quarter.

“We believe the market was expecting a strong quarter, particularly after seeing the capital markets revenue beats at the universal bank reports thus far,” said David Trone, an analyst at JMP Securities. “Add the investment management difficulties and Goldman shares could be in a tug-of-war today.”

Goldman’s shares ended the day down 0.7 percent at $114.86 on the New York Stock Exchange. The stock is up 29 percent so far this year.


Goldman earned $2.07 billion after preferred dividends, or $3.92 per share, for the first quarter. In the year-ago period, which was generally stronger for investment banks’ trading and banking activity, it earned $4.38 per share, excluding a one-time cost for buying back preferred stock from Warren Buffett’s Berkshire Hathaway Inc (NYS:BRK-A – News).

Analysts had expected $3.55 per share, according to Thomson Reuters I/B/E/S.

Goldman’s annualized return-on-equity – a closely watched measure of profitability – was 12.2 percent during the first quarter, up from a meager 3.7 percent last year, but still far below pre-crisis levels above 30 percent.

“You saw pretty good pickup in ROE, although not something that we consider acceptable,” Viniar said.

The bank’s average daily value at risk – which measures the maximum that Goldman could have lost on 95 percent of trading days – was $95 million during the first quarter, down 16 percent from the year-ago period and 29 percent from the fourth quarter.

With revenue under pressure, Goldman also made further cuts to staffing and expenses to boost its bottom line. The bank set aside $4.4 billion for compensation and benefits during the first quarter, down 16 percent from a year earlier. It also reduced its workforce by 900 employees, or 3 percent.

The staff and cost reductions were the final stretch of an aggressive cost-cutting program that began during the second half of 2011. Viniar said Goldman is likely finished with the effort as long as market conditions do not unexpectedly change.

(Additional reporting By Rick Rothacker and Jed Horowitz; editing by Paritosh Bansal, Dan Wilchins, John Wallace, Leslie Gevirtz)

Levels to Watch on Apple (AAPL) – Falling Through Could be Problem Reply

Here is a very simple game-plan to consider when looking at Apple (AAPL). Funny, just last week we discussed the put options as an idea that may make sense, however, the pricing did not make sense (then).

Take a look at the chart below. This shows that there is a fast zone approaching below $583. That could leadto a sell off down to $530 based on our calculations (TriggerPoint Research).

(Click to Enlarge)

Source: http://www.thedisciplinedinvestor.com