The Motley Fool Blog Network was abuzz again this past month with a multitude of thought-provoking articles. Here are three reads that you won't want to miss.
A contrarian's view
In the spirit of Chik fil-A founder Truett Cathy, Apple
Although many have chided Apple for its lack of product diversity as well as its mountain of idle cash languishing on the balance sheet, Mathew sees these as critical advantages that are central to his investment thesis. As he points out in his example with the iPhone, the lack of endless options makes it easier for customers, as they don't have to do a lot of research to figure out which model is appropriate. Contrast this product approach with Google's
Mathew also highlights the Mighty Fruit's steadfast hand at the cash helm by not falling prey to the Wall Street buyback game to simply massage earnings. It's no secret that most tech company buybacks occur at prices well north of intrinsic value, often speaking volumes about the real motives behind such purchases. Nor has Apple spent vast sums on mega-acquisitions, which often tend to be another value-sapping strategy. Instead, it keeps a calm hand over the cash deployment switch, which enables it to invest where and when appropriate.
The $64,000 question
While many investors and analysts alike ponder the what-ifs surrounding Facebook
In true value-investor fashion, Daniel runs Facebook through a good old-fashioned discounted cash flow analysis based on assumptions derived from what's currently known about the business. What's enlightening about this article is neither the $19 price tag that Daniel assigns to the stock nor the assumptions used, but rather the idea that shareholder value is ultimately borne of free cash flow and not of aspiration. Whether or not you agree with Daniel's assumptions, or, even more fundamentally, whether you believe DCF is a valid tool for a young innovator, the one thing we can all agree on is that by joining other insightful investors and examining complex problems from myriad angles, we will broaden our collective understanding, which will lead to smarter decisions. Offering that kind of reader enrichment is the very essence of what a blog should be.
Where theory and reality diverge
Since even before the infamous pricing blunder from last summer, Netflix
Furthermore, the company's international growth strategy, considered to be a focal point for creating shareholder value, seems instead to be giving the bottom line a bad case of jet lag, as international subscribers cost more than twice as much as their domestic counterparts -- yet another reason value investors may want to sit this one out.
Meanwhile, content-acquisition costs seem not only to be plaguing the income and cash-flow statements but are also wreaking havoc on the balance sheet, with the company's long-term debt ballooning. Sprinkle in a healthy serving of fierce competition from the likes of Wal-Mart, Amazon.com, and Hulu, and it may indeed be curtains for Reed Hastings' company.
Michael Finarelli owns shares of Apple and Google. The Motley Fool owns shares of Facebook, Netflix, Apple, Google, and Amazon.com. Motley Fool newsletter services have recommended buying shares of Google, Netflix, Amazon.com, and Apple, creating a bull call spread position in Apple, and creating a diagonal call position in Wal-Mart Stores. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.