Been a While

It's taken a couple months longer than expected, but I'm back! I'm going to resume posting, albeit perhaps less frequently than I did previously.

A lot has happened since I last posted here. First, M&A: On July 28th SSNC Technologies (SSNC) made an agreement to be acquired by the Carlyle Group for $982 MM. Though I would've liked to have held this one longer, I'm not going to turn down a 40% gain in six months!

Then in August PetroKazakhstan (PKZ) agreed to be acquired by the Chinese state-owned China National Petroleum Corp (CNPC) for $4.18 B, or $55 per share. More acquisitions will surely come as China continues to seek oil to fuel its burgeoning demand.

In other news, eBay agreed to purchase Skype for "up to $4.1 B" (a bit much?) on September 15th. The purchase fits eBay's pattern of acquiring/creating services (rent.com, paypal, et al) that use community as a means of achieving user lock-in. However, despite Skype's purported 54 million members, I have doubts about the potential benefit/monetization of the service. eBay can cross-market the eBay marketplace and Skype, of course, but what else? Sell sponsored ads? Could someone help me out here?

As far as stocks to purchase, I remain a big proponent of Digital River (DRIV) and J2 Global Communications (JCOM) at current price levels. DR closed at $35.38 on Friday, down more than 10% from the high it reached after reporting stellar Q2 numbers, and J2 is trading at around $37.50. While both stocks may continue to experience near-term volatility due to the market, their fundamentals remain extremely compelling, in this author's opinion.

Full disclosure: I own shares of Digital River and J2 Global Communications. I do not own shares of eBay.

The opinions expressed in this blog are my personal opinions. I am in no way responsible for trades made or not made because of something read here. One should always do his or her own due diligence before buying a stock.

Back in July

Dear readers,

I will resume posting this July.

regards,
Charles Z.T.

Who Owns What?

The following is a list of investment vehicles I find interesting to observe with links to their respective SEC filings. I welcome suggestions of others to add to the list.

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Billionaires
Paul Allen: Vulcan Corp

Warren Buffett: Berkshire Hathaway

Michael Dell: MSD Capital, L.P.

Lawrence Ellison: Tako Ventures

Bill Gates: Cascade Investment, LLC

Kirk Kirkorian: Tracinda Corp

Eddie Lambert: ESL Investments Inc

George Soros: Soros Fund Management LLC
028-06437 Atlantic Investment Management, Inc.
028-05875 Blavin & Company, Inc.
028-05444 Brahman Capital Corp.
028-11106 EAC Management LP
028-06301 Origin Capital Management LLC
028-10804 RR Partners LP
028-04503 Ridgecrest Investment Management LLC
028-05395 Select Equity Group, Inc.
028-06099 Seminole Management Company, Inc. (Paul C. Shiverick)
028-05369 Sirios Capital Management, L.P.
028-10036 Vantis Capital Management LLC
028-04945 Wyper Partners LLC

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Mutual Funds
Bridgeway Capital Management

Canyon Capital Advisors

Clipper Fund

Dodge & Cox

Evergreen Capital Management

Fairholme Funds

Legg Mason Value Trust (Bill Miller)

Longleaf Partners Funds

Muhlenkamp & Co

Oakmark Funds

Perritt Microcap Opportunities Fund

Royce Microcap Trust

Schneider Capital Management

Sterling Johnston Capital Management

Tweedy Browne Co

Weitz Funds

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Non-Profit Organizations
Gates Foundation: Bill & Melinda Gates Foundation

Harvard University: Harvard Management Co Inc

Digital River's Q1 2005 Results

Last Wednesday (4/27) Digital River (DRIV) posted excellent results for Q1: revenue increased 70.8% YoY from $31.9M to $54.5M and net income increased 84.2% YoY from $7.6M to $14M ($0.35 per diluted share). For Q2 2005 management sees $49M in revenues and earnings of $0.19 per diluted share, reflecting the company's first fully-taxed quarter. For FY 2005 management sees $209M in revenues and $1.02 in diluted net income per share.

Despite this stellar earnings announcement the stock slid more than 10% over the ensuing few days, presumably in anticipation of the impact taxes will have on the company's bottom line. Though the stock has since partially recovered from this slide it is still down 37% from its 52-week high as of today's close.

In my opinion DRIV should be looked at at current levels. I like the company because it has high margins, a scalable business model with relatively strong barriers to entry (barriers to entry include switching costs, product differentiation, and economies of scale), and a leadership position in e-commerce outsourcing, a rapidly growing sector. Fundamentally, Digital River's balance sheet is strong with $315M of cash and investments. The company is trading at a forward enterprise value/earnings multiple of ~23 for FY 2005 and sports a trailing PEG of ~0.3.

Full disclosure: I own shares of Digital River.

The opinions expressed in this blog are my personal opinions. I am in no way responsible for trades made or not made because of something read here. One should always do his or her own due diligence before buying a stock.

Digital River (DRIV) to Announce Earnings After the Bell Today

Digital River, Inc (DRIV) will announce its Q1 2005 financial results after market close today.

The company boosted its Q1 outlook on March 17, resulting in a >10% gap up. The gains were temporary, however; the stock has hovered near $30 ever since. As I write DRIV is currently trading at ~$29.

Q1 Earnings in Review: JCOM, SSNC, GOOG

In this post I'd like to touch on the earnings results of J2 Global Communications (JCOM), SS&C Technologies (SSNC), and Google (GOOG).

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On Monday (4/18/2005) J2 Global Communications (JCOM) announced its Q1 earnings results. Revenue rose 40% YoY to $32.2M and net income ~60% YoY to $10.2M, beating guidance and analyst estimates. Its gross margin improved slightly YoY to 79.8% from 79%.

Management also reiterated FY 2005 guidance as follows:

Revenues $145 -- $148 million
Net Earnings Per Share (1) $1.70 -- $1.75

...giving JCOM a forward P/E of ~19.5.

The stock still looks like a great value to me and remains one of my largest personal holdings. I strongly encourage due diligence here. For more information on JCOM reference my previous posts about the company here and here.

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On Wednesday (4/20/2005) SS&C Technologies (SSNC) announced record numbers for Q1. Revenues increased 43% YoY to $27.4M and net income increased 58% YoY to $6M. The company's outsourcing revenues saw the largest gains, expanding more than 100% YoY to $10.457M.

In a nutshell, SS&C provides business services to the financial services industry. For more information on what they do reference SS&C's Reuters Business Summary.

I like the company because of its focus on recurring cash flows and the broad scope of its product offerings, a distinct competitive advantage. Its rapidly-growing outsourcing business is an added bonus - the outsourcing trend will only gain in strength as time goes by.

Fundamentally speaking, SS&C has a solid balance sheet with more than $100M in cash and investments and a current ratio of ~3.5. Plus, despite the stock rallying nearly 20% over Thursday and Friday, the company's EV/FCF ratio still stands at a relatively modest ~16 (~$31M TTM FCF).

I like SSNC at current levels, but, as always, conduct your own due diligence.

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On Thursday (4/21/2005) Google (GOOG) announced suberb results for Q1. The company reported $1.29 of net income per diluted share, completely blowing away analyst estimates.

I don't own any shares of Google, but this faster-than-expected growth and all of the recent talk about the company (like the Gates vs. Google article from the latest issue of Fortune) are starting to make me wonder about buying a small stake in Google. I plan on writing an article specifically about Google in the near future.

Full disclosure: I am long JCOM and I am long SSNC. I do not own shares of GOOG.

The opinions expressed in this blog are my personal opinions. I am in no way responsible for trades made or not made because of something read here. One should always do his or her own due diligence before buying a stock.

Nasdaq to Buy Instinet for $1.8B

According to Britain's Financial Times, Nasdaq (NDAQ) is set to buy Instinet (INGP) for $1.8 billion. Read the story here.