/* Article Data (Server Side) article (o): [object Object] WSODIssue (s): |217235|218109|256588 DMSourceID (s): KAPITALL Source (s): Kapitall Headline (s): Will Japanese stocks with low P/FCF ratios win big with a tax cut Link (s): http://folionation.squarespace.com/news/2014/8/1/will-japanese-stocks-with-low-pfcf-ratios-win-big-with-a-tax.html Thumbnail (s): DocumentDate_raw (n): 1406906880000 DocumentDate (s): August 1, 2014 DocumentDate_smart (s): Aug 1, 2014 DocumentKey (s): 1107-290734296785734947656-3HH4L0JLB6EDDP57KQQLQC8OHQ ContentType (s): Article TrackingPixel (s): Content (s):

Japan plans to lower its corporate tax rate. Will these stocks with low P/FCF ratios benefit?

The International Monetary Fund released its latest review of Japan's economy on Thursday, and the financial body says that while the nation is slated to see high growth this year, failure to realize the goals of its economic reform plan could dampen future expectations and raise concerns over the country's finances. 

So far, Abenomics—the term used to describe Prime Minister Shinzo Abe's economic policy—has placed Japan's economy on track for 1.6% growth in 2014. A surge in consumer spending preceding Abe's mandated consumption tax hike and an increase in business investment drove the economy to faster-than-expected expansion in the first quarter. As a result, the IMF revised its growth forecast for Japan last week, raising its projection to 1.6% from 1.3%. 

But the fund expects Japan's growth to slow to 1.1% in 2015 as the country enacts Abe's third arrow initiatives and grapples with a shrinking workforce. The IMF states significant structural reforms to the labor market, risk capital provision, and agriculture and services regulation are needed to move Japan away from deflation and low growth in the coming year. 

Abe's policies, the IMF notes, have potential to help the economy in the long term, but certain factors, such as Japan's high level of debt and uptick in energy imports following the 2011 earthquake, make their success uncertain. The body praised Abe's new economic revitalization strategy—the "third arrow" of his economic reforms—and called for its rapid implementation. Per the plan, Japan's corporate-tax rate would be lowered from 35.6% to under 30% in the coming years, companies would be urged to drive up their ROE to match global figures, deregulation would take place in several sectors, and the workforce would bring in more women and immigrants. 

The IMF's outlook on Japan inspired us to take a closer look at Japanese stocks. We began with a group of stocks from Japan and subsequently screened it for undervalued stocks with a price to free cash flow (P/FCF) ratio below 15

The P/FCF ratio is a valuation metric that shows investors whether a stock's price is high or low relative to its annual free cash flow, which is operating cash flow minus capital expenditures (money spent on equipment, upgrading infrastructure, etc.). A company can use its free cash flow for a number of things, such as paying dividends to shareholders, starting a share buyback, and making acquisitions. 

Our interest in stocks with low P/FCF ratios was two-fold: we frequently like to search for potential investment opportunities for value investors, and the IMF states in its assessment that Abe's actions regarding corporate governance reforms could make it easier for companies to use their cash more effectively. 

For our final screen, we looked for stocks that were rallying about their 20-day, 50-day, and 200-day simple moving averages (SMA). We did this because even though Abe announced his new economic revitalization strategy over a month ago, the response was warm, with Nomura Securities' chief economist Tomo Kinoshita telling The Wall Street Journal that the proposed corporate reforms exceeded market expectations.

We were left with three Japanese stocks with low P/FCF ratios on our list. Do you think Abe's corporate reforms will help these companies get the most out of their cash? Use this list as a starting point for your own analysis, and let us know what you think in the comments.

Click on the interactive chart to view data over time. 

 

1. Nissan Motor Co., Ltd. (NSANY, Earnings, Analysts, Financials): Engages in the manufacture and sale of automotive products, industrial machinery, and marine equipment primarily in Japan, North America, and Europe. Market cap at $36.56B, most recent closing price at $17.93.

 


2. Nippon Telegraph & Telephone Corp. (NTT, Earnings, Analysts, Financials): Provides telecommunications services to residential and business customers in Japan. Market cap at $63.87B, most recent closing price at $28.08.

 


3. Sony Corporation (SNE, Earnings, Analysts, Financials): Designs, develops, manufactures, and sells electronic equipment, instruments, and devices for consumer, professional, and industrial markets worldwide. Market cap at $18.05B, most recent closing price at $17.40.

 


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Kapitall Wire offers free cutting edge investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by Kapitall Inc., and its affiliate companies.

Open a free account today get access to virtual cash portfolios, cutting-edge tools, stock market insights, and a live brokerage platform through our affiliated company, Kapitall Generation, LLC. 

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The e-commerce giant is marking its 20th anniversary with Prime Day, a huge day of international sales. 

Prime Day is the new Black Friday—at least that's what Amazon (AMZN) wants you to think. The online retailer turns 20 next week and is celebrating the occasion with an exclusive "global shopping event" on July 15. Amazon Prime users in the US as well as Austria, Canada, France, Germany, Italy, Japan, Spain and the UK will be able to partake in the festivities, which include a photo contest with a $10,000 Amazon gift card prize in each participating country as well as the opportunity to view commissioned #PrimeLiving-themed art.

Non-Prime members can also get in on the fun by signing up for a free, 30-day Prime trial. And this is where the reasoning behind Prime Day becomes clear. As MarketWatch points out, Prime members spend more on Amazon annually than regular consumers—roughly $1340 versus $968, respectively. Prime Day could increase Amazon's Prime numbers and, as a result, the subscription service's revenue. The one-day shopping extravanganza is also likely to boost Amazon's sales during what is generally an uneventful pre-back-to-school-shopping period. 

Below is a list of companies that might be excited or frightened by Prime Day. Those belonging to the former are Amazon's shipping partners, and those belonging to the latter are the e-commerce company's fellow retailers.

Do you think Prime Day will make Amazon an even bigger player in the retail world? 

Click on the interactive chart to view data over time. 

1. Amazon.com Inc. (AMZN, Earnings, Analysts, Financials): Operates as an online retailer in North America and internationally. Market cap at $203.83B, most recent closing price at $437.71.

Amazon is the number nine retailer in the US.

Domestic sales totaled $49.4 billion in 2014, an increase of 22.6% from a year ago. Global sales totaled $83.4 billion last year, with US sales accounting for 59.2%.

 

2. Costco Wholesale Corporation (COST, Earnings, Analysts, Financials): Operates membership warehouses that offer a selection of branded and private label products in a range of merchandise categories in no-frills, self-service warehouse facilities. Market cap at $59.94B, most recent closing price at $136.39.

Costco is the number three retailer in the US.

Domestic sales totaled $79.7 billion in 2014, an increase of 6.6% from a year ago. Global sales totaled $111.5 billion last year, with US sales accounting for 71.5%.

 

3. FedEx Corporation (FDX, Earnings, Analysts, Financials): Provides transportation, e-commerce, and business services in the United States and internationally. Market cap at $48.56B, most recent closing price at $171.13.

 

 

4. Target Corp. (TGT, Earnings, Analysts, Financials): Operates general merchandise stores in the United States. Market cap at $52.53B, most recent closing price at $82.27. Target is the number six retailer in the US.

Domestic sales totaled $72.6 billion in 2014, an increase of 1.9% from a year ago.

Global sales totaled $74.6 billion last year, with US sales accounting for 97.2%.

 

5. United Parcel Service Inc. (UPS, Earnings, Analysts, Financials): Provides transportation, logistics, and financial services in the United States and internationally. Market cap at $87.60B, most recent closing price at $97.20.

 

 

6. Wal-Mart Stores Inc. (WMT, Earnings, Analysts, Financials): Operates retail stores in various formats worldwide. Market cap at $231.43B, most recent closing price at $71.86. Wal-Mart is the number one retailer in the US.

Domestic sales totaled $49.4 billion in 2014, an increase of 22.6% from a year ago. Global sales totaled $83.4 billion last year, with US sales accounting for 59.2%.

 

(List compiled by Mary-Lynn Cesar. Monthly return data sourced from Zacks Investment Research. Sales data sourced from the National Retail Federation. All other data sourced from FINVIZ.)

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© Kapitall, Inc. All rights reserved. Kapitall Wire is a division of Kapitall, Inc. Kapitall Generation, LLC is a wholly owned subsidiary of Kapitall, Inc.

Kapitall Wire offers free cutting edge investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by Kapitall Inc., and its affiliate companies.

Open a free account today get access to virtual cash portfolios, cutting-edge tools, stock market insights, and a live brokerage platform through our affiliated company, Kapitall Generation, LLC. 

Securities products and services are offered by Kapitall Generation, LLC - a FINRA/SIPC member.

11 (o): [object Object] WSODIssue (s): |39111660|43662696 DMSourceID (s): KAPITALL Source (s): Kapitall Headline (s): Yelp is no longer for sale, so now it has to work on its sales Link (s): http://folionation.squarespace.com/news/2015/7/6/yelp-is-no-longer-for-sale-so-now-it-has-to-work-on-its-sale.html Thumbnail (s): DocumentDate_raw (n): 1436194500000 DocumentDate (s): July 6, 2015 DocumentDate_smart (s): Jul 6, 2015 DocumentKey (s): 1107-290734296785735397057-3VSC0F8H89KH2RP3LG8DMOCFBN ContentType (s): Article TrackingPixel (s): Teaser (s):

Now that Yelp is longer on the market, it still has to address its problems. The same goes for Groupon too. 

After Yelp (YELP) temporarily halted its plans for a sale on July 2, the stock unsurprisingly fell to below $40 and is just barely above its yearly low.

Yelp is a pure speculation play. The company may have attracted some bids, but the offers were likely at a discount to the stock price, which has fallen over 32 percent from $55.15 at the beginning of the year and is nearing its 52-week low of $36.10.

Though revenue from the firm is still growing each quarter, the company could do better. In the first-quarter, Yelp increased its sales head count by 25 percent. It spent 20 percent of its revenue on product development.

Furthermore, as Bloomberg points out, only 1.5 million transactions have been made through the Yelp Platform, which launched in July 2013 with the intention of directly connecting consumers with vendors. Considering that on average 142 million visitors visit Yelp each month, the company has a lot of room to grow in this area.

Groupon (GRPN) is another online firm that is struggling. Last month, Jason Child, Groupon’s CFO since 2010, said he would leave the company. The stock is down over 40 percent this year:

Groupon's costs are high. During the first quarter of 2015, the company spent $53 million in marketing. It spent another $41 million, indirectly, through order discounts. Put together, the total cost was $94 million. Search engine marketing display costs were $2 million higher than last year. Yelp is allocating its spending differently. As mentioned in the first-quarter earnings call, the company chose to spend money on developing its mobile app, which now accounts for 65 percent of Yelp's total searches.

Additionally, Groupon's income is falling. In the first quarter, active customers grew, but the average billing per active customer fell to $135. It was $155 in the preceding quarter.

Expect a continued downward trend for Groupon and Yelp. Until the firms show signs of improving business, neither's stock is likely to recover.

Written by Chris Lau

Click on the interactive chart to view data over time. 

 

1. Groupon Inc. (GRPN, Earnings, Analysts, Financials): Operates online local commerce marketplaces that connect merchants to consumers by offering goods and services at a discount worldwide. Market cap at $3.28B, most recent closing price at $4.85.

 

 

2. Yelp Inc. (YELP, Earnings, Analysts, Financials): Operates a platform that connects people with local businesses in the United States. Market cap at $2.76B, most recent closing price at $38.18.

 

 

 

(Monthly return data sourced from Zacks Investment Research. All other data sourced from FINVIZ.)

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© Kapitall, Inc. All rights reserved. Kapitall Wire is a division of Kapitall, Inc. Kapitall Generation, LLC is a wholly owned subsidiary of Kapitall, Inc.

Kapitall Wire offers free cutting edge investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by Kapitall Inc., and its affiliate companies.

Open a free account today get access to virtual cash portfolios, cutting-edge tools, stock market insights, and a live brokerage platform through our affiliated company, Kapitall Generation, LLC. 

Securities products and services are offered by Kapitall Generation, LLC - a FINRA/SIPC member.

12 (o): [object Object] WSODIssue (s): |36276|45294|3699858|90050|72887506|256588|274387|283359 DMSourceID (s): KAPITALL Source (s): Kapitall Headline (s): Streaming music and television are the new normal Link (s): http://folionation.squarespace.com/news/2015/7/6/streaming-music-and-television-are-the-new-normal.html Thumbnail (s): DocumentDate_raw (n): 1436192160000 DocumentDate (s): July 6, 2015 DocumentDate_smart (s): Jul 6, 2015 DocumentKey (s): 1107-290734296785735396998-2FH0QI5654H81JBCQNT51S5ECP ContentType (s): Article TrackingPixel (s): Teaser (s):

Everyone from tech companies to telecom firms is moving into streaming music and television this year.

The year is officially half over, and it’s apparent that 2015 is a banner year for streaming media, specifically music and television. Within the realm of streaming music, there have been high-profile entrants—Tidal and Apple Music—as well as tweaks to existing services in an attempt to outshine the competition, e.g. Google Play’s free radio and Spotify’s expansion into podcasts and video. Streaming TV has also become a more crowded field thanks to new standalone offerings from cable providers, television networks and video game console makers. It’s a new age out there.

Streaming Music Today

The streaming music industry is growing rapidly. By the end of 2014, 163.9 billion songs had been streamed—up 54.5 percent from the previous year—to the tune of $1.87 billion in revenue. CD revenue, on the other hand, totaled $1.85 billion, making last year the first year in history that streaming sales eclipsed CD sales.

On Tuesday, Apple Inc. (AAPL) became the latest company to hop on the streaming music bandwagon with the launch of Apple Music. The service, which costs $9.99 a month after a free three-month trial, received a lot of publicity in the weeks leading up to its debut, and not just because the world’s most admired company is at the helm. Notorious Spotify defector Taylor Swift publicly criticized Apple for refusing to pay royalties during the free trial, which led Apple to change its mind and agree to pay royalties on all music streamed during the three-month period. After that, Swift decided to put her latest album 1989 on Apple Music, the only other streaming platform to receive the honor besides Google Inc.’s (GOOG) Google Play.

Speaking of Google, the tech company has stepped up its streaming music offering in an effort to take on Apple Music and Spotify. On June 22, almost a week prior to the Apple Music launch, Google introduced a free, ad-supported radio tier to Google Play that features curated playlists. The company also has a $9.99 per month tier. By the end of the day, Apple’s stock went up 0.1 percent, Google fell 0.3 percent and online radio pioneer Pandora Media, Inc. (P) slid 1.3 percent.

Despite Pandora’s underwhelming stock market performance— the stock is down 12.9 percent this year—CEO Brian McAndrews said the company held a 10 percent share of U.S. radio in March, up from 9.1 percent a year earlier. Pandora also has the second highest number of paying users among streaming music services: Spotify has over 20 million, Pandora has 3.8 million and Tidal has around 800,000. Of course, consumers still enjoy listening to music for free: at least 50 million of Spotify’s active users opt for the free tier, and over 70 million of Pandora’s active users opt for the free version. However, paid subscriptions are on the rise, increasing by 26 percent between 2013 and 2014 to 7.7 million

Without a doubt, demand for streaming music is growing. According to music executive Tom Silverman, streaming revenue is expected to reach $3.96 billion in 2019, and its share of total music revenue would grow from 44.1 percent in 2015 to 71.6 percent in 2019.

Streaming TV Today

Like streaming music, the streaming TV field is exploding as well, and much of its growth can be attributed to the death of traditional pay-TV and the proliferation of television watching alternatives. During the first quarter of 2015, Variety reports that the US pay-TV business contracted for the first time ever with a net loss of 31,000 subscribers. Now, the pay-TV business is on track to shrink by 0.5 percent at an annualized rate.

Furthermore, market research firm NPD Group predicts that 40 percent of US homes will have a streaming media device, like an Apple TV, Roku or Google Chromecast, by 2017, up from 16 percent in 2014. NPD Group even notes that while Apple and Roku were the first companies to drive growth among streaming media players, the market has since flourished with the release of devices from Amazon.com Inc. (AMZN) as well as smart TVs and wireless-equipped video game consoles.

Which brings us to the companies that are trying to capitalize on consumers’ changing viewing habits by offering streaming cable services. In January, Dish Network Corp. (DISHlaunched Sling TV, a $20-per-month live and on-demand television service that streams to Internet-connected devices. The following month, Sony Corporation (SNEdebuted PlayStation Vue, a $50-a-month Internet TV service that is only available in Chicago, New York and Philadelphia and requires either a PlayStation 3 or 4 console.

Verizon Communications Inc. (VZ) has said its streaming TV service will bow this summer. Aspiring streaming media titan Apple is also reportedly getting in on the action with its own streaming TV service this fall. According to Business Insider, the service has the potential to net $2.4 billion in revenue in 2016 so long as it costs $35 a month—the monthly fee is rumored to be between $30 and $40—and has 7.4 million subscribers by the end of next year.

And then there are the networks. HBO launched its standalone subscription HBO Now service in April, and Showtime’s service is coming out in July. The PowerShares Dynamic Media ETF (PBS)—which counts Showtime parent company CBS Corporation (CBS), HBO parent company Time Warner Inc. (TWX), Google and Dish among its holdings—is up 5.16% for the year.

Streaming is becoming the preferred mode of consumption for millions of Americans, whether it’s music or television. As more people seek out services that provide access to their favorite types of media, more companies are likely to branch out into these fields. And the moves make sense as shifting consumer habits present billion-dollar opportunities for companies that are able to establish a foothold.

By Mary-Lynn Cesar

13 (o): [object Object] WSODIssue (s): |45563793|72887506|167459|205778|207106|237331 DMSourceID (s): KAPITALL Source (s): Kapitall Headline (s): Intel plays it smart by moving into wearables Link (s): http://folionation.squarespace.com/news/2015/7/1/intel-plays-it-smart-by-moving-into-wearables.html Thumbnail (s): DocumentDate_raw (n): 1435780320000 DocumentDate (s): July 1, 2015 DocumentDate_smart (s): Jul 1, 2015 DocumentKey (s): 1107-290734296785735393222-12P0L6DSRU6CHIK95QO769KU2B ContentType (s): Article TrackingPixel (s): Teaser (s):

The computer market is dying, so Intel is focusing on the next big thing: smart glasses.

A disastrous outlook from fellow PC components supplier Micron Technology (MU) hurt Intel (INTC) shares last week, but that is not stopping Intel from broadening its business. On June 17, the processor maker acquired eyewear maker Recon Instruments for a rumored $175 million. Is this a good move?

Wearables is the next area of growth in technology. Demand for PCs is falling, with research firm IDC predicting worldwide shipments will fall by 6.2 percent in 2015. Smartphones are still selling, but Intel is not strategically positioned in this market. Its Atom and Celeron processors are mobile-focused, but Qualcomm (QCOM) and Samsung (SSNLF) are the dominant players.

Intel first invested in Recon back in 2013. By acquiring the firm, Intel can more closely align Recon’s design, brand, and platform with its own technology. Future wearable products from Recon will sport Intel internal parts.

Strategically, Intel is preventing itself from being shut out of the wearables market. Facebook (FB), Google (GOOG), and Microsoft (MSFT) are all moving forward in developing head mounted wearables.

Intel’s vertical integration is ultimately good news for investors. With the stock close to yearly lows, Intel offers investors exposure to the wearables space at low multiples since it has a forward P/E of 13.

Written by Chris Lau

Click on the interactive chart to view data over time. 

 

1. Facebook Inc. (FB, Earnings, Analysts, Financials): Operates as a social networking company worldwide. Market cap at $245.31B, most recent closing price at $85.76.

 

 

 

2. Google Inc. (GOOG, Earnings, Analysts, Financials): Builds tech products and provides services to organize information. Market cap at $355.73B, most recent closing price at $520.51.

 

 

3. Intel Corporation (INTC, Earnings, Analysts, Financials): Engages in the design, manufacture, and sale of integrated circuits for computing and communications industries worldwide. Market cap at $142.75B, most recent closing price at $30.42.

 

 

4. Microsoft Corporation (MSFT, Earnings, Analysts, Financials): Develops, licenses, and supports a range of software products and services for various computing devices worldwide. Market cap at $361.76B, most recent closing price at $44.15.

 

 

5. Micron Technology Inc. (MU, Earnings, Analysts, Financials): Engages in the manufacture and marketing of semiconductor devices worldwide. Market cap at $21.26B, most recent closing price at $18.84.

 

 

6. QUALCOMM Incorporated (QCOM, Earnings, Analysts, Financials): Engages in the development, design, manufacture, and marketing of digital wireless telecommunications products and services. Market cap at $102.52B, most recent closing price at $62.63.

 

 

 (Monthly return data sourced from Zacks Investment Research. All other data sourced from FINVIZ.)

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Kapitall Wire offers free cutting edge investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by Kapitall Inc., and its affiliate companies.

Open a free account today get access to virtual cash portfolios, cutting-edge tools, stock market insights, and a live brokerage platform through our affiliated company, Kapitall Generation, LLC. 

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14 (o): [object Object] WSODIssue (s): |3145557|4147820|237989 DMSourceID (s): KAPITALL Source (s): Kapitall Headline (s): IAC is spinning off Match.com Link (s): http://folionation.squarespace.com/news/2015/6/30/iac-is-spinning-off-matchcom.html Thumbnail (s): DocumentDate_raw (n): 1435691220000 DocumentDate (s): June 30, 2015 DocumentDate_smart (s): Jun 30, 2015 DocumentKey (s): 1107-290734296785735392040-5RNTJDELNTID4C67HNKJ2UR924 ContentType (s): Article TrackingPixel (s): Teaser (s):

Match.com has brought happiness to millions of couples. Will the spinoff do the same for IAC shareholders?

IAC/InterActive (IACI) is already trading well above the $60 lows the stock encountered last year. On June 25, the stock reached a new high of $82.40 on unusually strong trading volume. There is one big reason investors should expect more upside though: the Match.com IPO.

Spinning off The Match Group from IAC is a natural progression for IAC. Over the last twenty years, the company has generated solid returns for shareholders. It grew from a company with a $275 million base to, along with its other spinoffs, having $44 billion in combined shareholder value. The IPO will represent fewer than 20 percent of common stock of Match.com.

IAC recently closed at $81.19 on very strong trading volume. The stock has a market cap of $6.6 billion and a book value of $1.8 billion. The P/E is reasonable, too, at 16.3 times based on $4.94 per share earnings. The stock’s dividend yield is 1.7 percent. This is not very high for income investors, but the strong performance from IAC could mean steady returns ahead.

There also isn’t much competition out there for IAC and Match.com. Spark Networks (LOV) and MeetMe (MEET) are down around 40 percent each this year. MeetMe’s social network is gaining no traction; similarly, Spark Networks is struggling. In the first quarter, Spark Network’s subscriber figures were weak, and the average paid subscribers fell 25 percent year over year to 213,445.

Taking this into consideration, IAC shareholders have good reason to hold onto the stock as Match.com becomes a public company. 

Written by Chris Lau

 

Click on the interactive chart to view data over time. 

1. IAC/InterActive Corp (IACI, Earnings, Analysts, Financials): Engages in the Internet business in the United States and internationally. Market cap at $6.55B, most recent closing price at $78.32.

 

 

2. Spark Networks Inc. (LOV, Earnings, Analysts, Financials): Provides online personals services in the United States and internationally. Market cap at $79.92M, most recent closing price at $3.12.

 

 

3. MeetMe Inc. (MEET, Earnings, Analysts, Financials): Owns and operates a social network for meeting new people on the Web and on mobile platforms in the United States. Market cap at $75.00M, most recent closing price at $1.70.

 

 

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© Kapitall, Inc. All rights reserved. Kapitall Wire is a division of Kapitall, Inc. Kapitall Generation, LLC is a wholly owned subsidiary of Kapitall, Inc.

Kapitall Wire offers free cutting edge investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by Kapitall Inc., and its affiliate companies.

Open a free account today get access to virtual cash portfolios, cutting-edge tools, stock market insights, and a live brokerage platform through our affiliated company, Kapitall Generation, LLC. 

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15 (o): [object Object] WSODIssue (s): |36276|211573 DMSourceID (s): KAPITALL Source (s): Kapitall Headline (s): Should you add Netflix to your list? Link (s): http://folionation.squarespace.com/news/2015/6/29/should-you-add-netflix-to-your-list.html Thumbnail (s): DocumentDate_raw (n): 1435593480000 DocumentDate (s): June 29, 2015 DocumentDate_smart (s): Jun 29, 2015 DocumentKey (s): 1107-290734296785735390498-0SS0VKIR9IS4OL143L5RFCS3F8 ContentType (s): Article TrackingPixel (s): Teaser (s):

After Carl Icahn ditched Netflix last week, maybe it's better to own a Netflix account than actual shares.

Shares of Netflix (NFLX) defied gravity and reached $706.24 earlier this year before pulling back. The stock then closed at $651.62 last week after Carl Icahn, a famous activist investor, sold whatever he had left in the company and netted $1.6 billion.

Icahn tweeted about his sale:

 

Sold last of our $NFLX today. Believe $AAPL currently represents same opportunity we stated NFLX offered several years ago.

— Carl Icahn (@Carl_C_Icahn) June 24, 2015

Apple and Netlifx are not comparable, and both represent opposite ends of the spectrum when it comes to valuation. Investors are paying a huge premium for Netflix. The belief is that the online movie streaming giant will grow exponentially for years to come. Netflix has a forward P/E over 70. Apple’s forward P/E, on the other hand, is only 14:

Apple is generating enormous profits from the iPhone, but the company has two problems. First, its new music streaming business is late to the market. The initiative keeps the company relevant in streaming music but is unlikely to add meaningfully to profits. Second, the Apple Watch has yet to prove it is successful. The first generation wearable has limited battery life (of less than one day) and requires an iPhone.

Netflix is a $39.5 billion company. Its upcoming share split will boost liquidity and attract smaller investors.

Those considering an investment in Netflix should exercise caution. The share split changes nothing in the valuation of the stock: the market cap stays the same (number of shares x stock price). Even though the Apple comparison may not be apt, investors might consider following Icahn and selling the stock today.

Written by Chris Lau


Click on the interactive chart to view data over time. 

1. Apple Inc. (AAPL, Earnings, Analysts, Financials): Designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, as well as sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide. Market cap at $730.21B, most recent closing price at $126.75.

 

2. Netflix Inc. (NFLX, Earnings, Analysts, Financials): Provides subscription-based Internet services for TV shows and movies in the United States and internationally. Market cap at $39.50B, most recent closing price at $651.62.

 

 

(Monthly return data sourced from Zacks Investment Research. All other data sourced from FINVIZ.)

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© Kapitall, Inc. All rights reserved. Kapitall Wire is a division of Kapitall, Inc. Kapitall Generation, LLC is a wholly owned subsidiary of Kapitall, Inc.

Kapitall Wire offers free cutting edge investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by Kapitall Inc., and its affiliate companies.

Open a free account today get access to virtual cash portfolios, cutting-edge tools, stock market insights, and a live brokerage platform through our affiliated company, Kapitall Generation, LLC. 

Securities products and services are offered by Kapitall Generation, LLC - a FINRA/SIPC member.

*/ Will Japanese stocks with low P/FCF ratios win big with a tax cut

Will Japanese stocks with low P/FCF ratios win big with a tax cut

Japan plans to lower its corporate tax rate. Will these stocks with low P/FCF ratios benefit?

The International Monetary Fund released its latest review of Japan's economy on Thursday, and the financial body says that while the nation is slated to see high growth this year, failure to realize the goals of its economic reform plan could dampen future expectations and raise concerns over the country's finances. 

So far, Abenomics—the term used to describe Prime Minister Shinzo Abe's economic policy—has placed Japan's economy on track for 1.6% growth in 2014. A surge in consumer spending preceding Abe's mandated consumption tax hike and an increase in business investment drove the economy to faster-than-expected expansion in the first quarter. As a result, the IMF revised its growth forecast for Japan last week, raising its projection to 1.6% from 1.3%. 

But the fund expects Japan's growth to slow to 1.1% in 2015 as the country enacts Abe's third arrow initiatives and grapples with a shrinking workforce. The IMF states significant structural reforms to the labor market, risk capital provision, and agriculture and services regulation are needed to move Japan away from deflation and low growth in the coming year. 

Abe's policies, the IMF notes, have potential to help the economy in the long term, but certain factors, such as Japan's high level of debt and uptick in energy imports following the 2011 earthquake, make their success uncertain. The body praised Abe's new economic revitalization strategy—the "third arrow" of his economic reforms—and called for its rapid implementation. Per the plan, Japan's corporate-tax rate would be lowered from 35.6% to under 30% in the coming years, companies would be urged to drive up their ROE to match global figures, deregulation would take place in several sectors, and the workforce would bring in more women and immigrants. 

The IMF's outlook on Japan inspired us to take a closer look at Japanese stocks. We began with a group of stocks from Japan and subsequently screened it for undervalued stocks with a price to free cash flow (P/FCF) ratio below 15. 

The P/FCF ratio is a valuation metric that shows investors whether a stock's price is high or low relative to its annual free cash flow, which is operating cash flow minus capital expenditures (money spent on equipment, upgrading infrastructure, etc.). A company can use its free cash flow for a number of things, such as paying dividends to shareholders, starting a share buyback, and making acquisitions. 

Our interest in stocks with low P/FCF ratios was two-fold: we frequently like to search for potential investment opportunities for value investors, and the IMF states in its assessment that Abe's actions regarding corporate governance reforms could make it easier for companies to use their cash more effectively. 

For our final screen, we looked for stocks that were rallying about their 20-day, 50-day, and 200-day simple moving averages (SMA). We did this because even though Abe announced his new economic revitalization strategy over a month ago, the response was warm, with Nomura Securities' chief economist Tomo Kinoshita telling The Wall Street Journal that the proposed corporate reforms exceeded market expectations.

We were left with three Japanese stocks with low P/FCF ratios on our list. Do you think Abe's corporate reforms will help these companies get the most out of their cash? Use this list as a starting point for your own analysis, and let us know what you think in the comments.

Click on the interactive chart to view data over time. 

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1. Nissan Motor Co., Ltd. (NSANY, Earnings, Analysts, Financials): Engages in the manufacture and sale of automotive products, industrial machinery, and marine equipment primarily in Japan, North America, and Europe. Market cap at $36.56B, most recent closing price at $17.93.

 

2. Nippon Telegraph & Telephone Corp. (NTT, Earnings, Analysts, Financials): Provides telecommunications services to residential and business customers in Japan. Market cap at $63.87B, most recent closing price at $28.08.

 

3. Sony Corporation (SNE, Earnings, Analysts, Financials): Designs, develops, manufactures, and sells electronic equipment, instruments, and devices for consumer, professional, and industrial markets worldwide. Market cap at $18.05B, most recent closing price at $17.40.

 

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Nissan Motor Co., Ltd.(NSANY, Chart, Download SEC Filings)Nippon Telegraph & Telephone Corp.(NTT, Chart, Download SEC Filings)Sony Corporation(SNE, Chart, Download SEC Filings)

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© Kapitall, Inc. All rights reserved. Kapitall Wire is a division of Kapitall, Inc. Kapitall Generation, LLC is a wholly owned subsidiary of Kapitall, Inc.

Kapitall Wire offers free cutting edge investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by Kapitall Inc., and its affiliate companies.

Open a free account today get access to virtual cash portfolios, cutting-edge tools, stock market insights, and a live brokerage platform through our affiliated company, Kapitall Generation, LLC. 

Securities products and services are offered by Kapitall Generation, LLC - a FINRA/SIPC member.

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