5-Star Companies at Fire-Sale Prices

• Report this Comment On July 16, 2010, at 4:33 AM, baldheadeddork wrote:

  NVDA is a five-star company? On what planet?

  Over the last year it's trailed the NASDAQ by 25 points and AMD (a disgraceful two-star company according to the CAPS Mensans) by 109 points. Buying AMD a year ago has doubled your money and change...while an investment in nVidia has barely beat inflation.

  The amazing thing is, the five star rating isn't because of pics made years before nVidia's current troubles. AMD launched their 5xxx video cards last September 22. On that day, everyone paying attention knew the new Radeons were really, really good, and nVidia was going to miss their launch and were fighting substantial heat problems. Everything since has only backed up what we knew last September 22.

  But of the 97 CAPS votes made on nVidia since then, 92 have predicted the stock would outperform the market. (That's pretty close to NVDA's all-time 96% outpeform.) How bad did the people who had access to the relevant information blow this call? Since last September 25 NVDA is down 28.5% against a 2.7% rise for the S&P. Not one long pick made or updated since the launch of the Radeon 5xxx is in the green, and several of the names attached to the red ink are CAPS All-Stars.

  I'm not against mixing fun with investing news and conversation, and the CAPS system is fun. But giving it _any_ credence as an investing tool is a very unfunny joke.

• Report this Comment On July 20, 2010, at 2:33 PM, stan8331 wrote:

  baldheadeddork - What's a joke is giving CAPS any credence as a SHORT-TERM trading tool. It's always possible to make a lot of money on weak companies that end up not going bankrupt, and there's nothing wrong with that as an investment strategy, given adequate diversification. But to suggest that AMD is a superior company to NVDA is simply inaccurate. I like AMD - I'm a satisfied customer of theirs - but the fact is AMD has massive debt and is still vulnerable if the economy were to head south again. At current prices, NVDA is a superior bargain and that's why it's highly rated in CAPS.

• Report this Comment On July 26, 2010, at 9:16 PM, baldheadeddork wrote:

  I wouldn't call a year-long period exactly short term, but if you want to go back farther NVDA has been burning CAPS players much longer than that.

  No offense intended, but looking at the current debt situation isn't exactly a long-term call, either. My number one item in being bearish on NVDA is their product situation through 2015. They are going to lose the chipset business, that's a done deal. They're also going to lose the low-end PC graphics business as that moves to the CPU for Intel and AMD procs. That leaves two markets, and if mobile devise CPU makers like Qualcomm follow Intel and AMD and move to on-die graphics, they'll lose that market, too.

  I wouldn't buy a share of AMD at gun point (and I just bought a GTX470 for my next computer) but they're clearly going to have the upper hand in product and revenues for the foreseeable future. Bringing chipset production in house gives them a chance to fix one of their longest-standing problems (uneven motherboard quality) and they'll get the chipset revenues that had been going to nVidia and others. Having ATI graphics technology is going to give AMD a competitive advantage over Intel in the low end and midrange CPU market, and they'll still be fighting with NVDA for the high end. And, at long last, it appears AMD and Intel have settled into their own territories in the CPU market. AMD doesn't make very much over $200, and (save the Atom) Intel has mostly abandoned the <$150 market. If they can avoid a price war, they can both survive and be profitable for a long time in the CPU business.

  When I look at 2015, I see AMD as the Kia to Intel's Toyota, but they're both still in multiple levels of the business. nVidia? Competing with AMD/ATI for non-integrated video cards and...what? If they become a one category company they're always going to be one bad generation away from being wiped out, the same situation ATI was in before AMD bought them.

  That's the most likely outcome for nVidia. But the only logical buyer is Intel, and that's complicated because of antitrust concerns. If Intel buys or develops their own graphics, they can't close AMD out of the high end market, and that dilutes the value of nVidia to Intel.

  I just can't see this company being worth $6b five years from now, let alone rebounding to $15-18b. I think there's a better chance that they become another Palm.

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