Market summary - 2-22-2011

Oil increases significantly and 10 year bond yield goes back to below 3.5% level as the equity market sold off badly today. It's one of the days you see some of your mutual funds change over 4%. If this kind of fluctuation continues you might consider this a topping process based on my past observations. 

Monthly return by sectors 1-28-2011

Despite last week's turmoil, most sectors still finish the month positively (still one trading day left though). Energy did come up to the top as I guessed last time and I think it will stay outperform others. 

Amazon.com earning release 1-27-2011

On 1/28/2011, Amazon's stock price dropped more than 7% to 171 after a concerning earning report. I'm surprised to see Amazon didn't do well comparing with same quarter last year since the weather from holiday season till now favors online shopping. How did the company do anyway? It did well in general except for the efficiency which is really important for companies like Amazon.com and Walmart.

Amazon's sales has a great seasonal pattern so you have to compare within same quarters for different years as you look at ratios. If you look at Asset turnover for 4th quarters you'll find 0.79 vs 0.84, this year vs last year. 

Similarly if you look at the inventory turnover ratios for the quarterly results you should find this year's number is not as good as last year. I believe these efficiency numbers are the main driver worrying investors, sending the stock 7% lower. Well, of course, the general market condition is in the correction mood which also encouraged some taking profit. 

Now let's take a look at Amazon's earning surprises and market reactions. 

It has been the 3rd quarters since Amazon hasn't delivered nice surprises. And the stock price is actually still pretty close to its all time high. If the market goes down from here I would expect Amazon will go down further. However, I personally like the company and I believe it will become more dominant in the future so I'll definitely load its stock when bargain price comes along. When I get more time I'll do a more thorough research on Amazon. It should be worth my time investment:).

Netflix subscriber-1-26-2010

Alright, another blow-out earning for Netflix. Subscriber's growth is superb, although it's still defined in my linear line shown underneath.

I don't think this quarter changes my thesis:

http://mzexcel.blogspot.com/2010/11/netflix-analysis.html

Latest earning: 

http://files.shareholder.com/downloads/NFLX/1145258571x0x437075/925e81c4-3d5d-44b6-ae5e-a70c91251131/Q410%20Letter%20to%20shareholders.pdf

Updated subscriber, acquisition cost, churn, average revenue etc. 

Bonds update

It seems the 10yr yield is peaked around 3.5% in short term (at least there seems to be strong resistance at that level, technically) and the correlation between bonds and equity are getting better. 

Quarterly earning release stats

Over 100 companies have reported earnings for the most recent quarter. Here are some stats which might be interesting.

Apple's latest quarter earnings

A busy week. Heavy weight tech firms had their leadership shakeup and investors are also busy valuating which banks are better. Apple has a great earning release but Jobs is on sick leave again. Google wants to get the star-up feel back as Eric moves aside to deals, government, and customers duties. HP changes some of board members as the discontent of shareholders towards the handling of Mark Hurd mounts. These board/executive changes can be good or bad but I definitely think loss of Jobs will be a changing point for Apple. Business week has a good article talking about the issue: http://www.businessweek.com/magazine/content/11_05/b4213006664366.htm

“Only Steve Jobs could have had the visionary spirit—and risk tolerance—to turn Apple into a mobile phone company” I totally agree. World’s second large company’s leader bears great pressure and I would be surprised to see Apple without Jobs keeps up with continuous meaningful innovations. Tim Cook is an operations genius which only guarantees profitable operations but probably not the long term super high growth some investors were imagining while holding the company’s stock.

Whatever happens next Apple’s staggering performance should be able to hold for a while I think. Here are some stats on this latest quarter’s earning. 

You might think I'm going too academic here.:) but after I read some journal articles about SUE (standardized unexpected earnings) I think it's useful somehow. Google it if you're interested.

an awesome quarter.