Going, Going, Gone...

Here are my picks for July. In this segment I pick 2 stocks that I am high on and 1 that I am not so high on.

Going (Long Buy): Petroleo Brasileiro SA PBR
This stock could be one of those stocks that make you say "why didn't I buy that stock when it was down in the gutter and everyone knew it would recover". PBR is the biggest oil company in Brazil (a growing market, which happens to be hosting the world cup in 2 years) and a history of success. Some recent legislation and a spill have put some negative light on the company, but with a P/E of 6, a solid dividend and a Q1 net profit margin that was up over 2011, it appears to be a decent value. At 19.50, it is down after being in the 30's in March. I bought in at 25 and although results haven't been great so far, I bought thinking long term and now its even a potential better value than before.

Another reason I am so high on Petroleo Brasileiro is that they have the rights to most of the deepwater wells off the coast of brazil, which are some of the biggest deep water reserves in the world. The economist did a write up about these reserves last year and if Petroleo Brasileiro can harness those reserves (as well as get through the legislation), their pool of oil could grow immensely. Oil companies have a history of hitting bumps and I think PBR could be on the upswing.

Going (1 Year - Long Buy): Skullcandy Inc SKUL
I personally think they offer the best value in the headphones category, which is saying something since they are supposed to be the "stylish" line. Their image keeps them relevant and will allow them to harness the youth market for a long time, with their endorsement program (that includes Kevin Durant and James Harden) and personalized products. They offer both entry and mid level products, which prevents them from being dependent on one market.

Another reason I am high in Skullcandy is the amount of shorts that are out on the stock. Apparently a lot of investors thought Skullcandy would be a bust after its IPO and looked to short. However, after 3 straight strong financial announcements, its looking like few of these people will be picking up their shorts and this will likely lead to an increased evaluation as the percentage of stock that is shorted is reduced.

Skullcandy products sync are compatible with iOS products and will likely see a huge boon in sales after the release of the new iPhone at some point in the new quarter. 9 analysts are calling for a $22 valuation, which means if you buy now at 14.50, there is some nice room for growth.

Gone (Stay Away): Microsoft MSFT
I actually liked Microsofts recovery prior to hearing the news that they were releasing not 1, but 2 tablets into the consumer market. While I agree the new surface tablet will sell, there are a lot of investors looking at Microsoft as capable of outselling the iPad. A lot of people will argue that the iPhone market share seemed insurmountable before the Android products came out, but I think phones are selected much differently than a tablet device. A tablet is not a necessity that every person feels they need, but rather a device for pleasure. Android phones are offered at a number of different prices, sizes and carriers, which allow people who wouldn't pay over 100 bucks for a phone to have a "android" phone. Microsoft isn't going to be able to just have their product offered in more places, it is going to have to out-cool the iPad and Microsoft has never been at the forefront of "cool".

Also, anyone who uses a tablet knows the key to the experience is the elegance of the apps, which Microsoft will be years behind iOS and even Android. I find it very hard to believe that Microsoft can create the level of development and applications that we see on iOS anytime soon, or for a profit for that matter. All the bells and whistles that were shown off were quite minimal in my opinion (who really cares about using it as a secondary controller for Xbox?) and as we all know, its all about the software. Mixed reviews on Windows 8 and their track record with making their own hardware scares me on this one. Lets not forget, their one success was the xbox 360 which came out BEFORE the PS3, not 2 years after like in the tablet market.

Own Your Favorite Team! Or At Least Part of Man U

I think many enthusiastic sports fans such as myself like to put on their GM "hat" and ponder moves that should be made to improve our favorite teams. I personally have hated and praised Brian Sabbean more times than I can remember, by judging his moves (or lack of) directly after they happen. Wouldn't it be cool to have an ownership share of your favorite team? Well, for only the 3rd time in sporting history (Green Bay Packers are public and the Cleveland Indians were once before) a professional team will soon be available for purchase on the stock market.

Manchester United recently announced it will file for an IPO that will make it available for public ownership on the stock market. While many Americans who don't follow soccer may not understand the magnitude of a team like this going public, its comparable to the Yankees going public. With Man U's strong record of succes, powerful brand reputation and soccer viewership growing across the world (including the US), Manchester United appears to be a real investment with potential growth. 

While owning a small share of stock in your favorite team might not make the world of difference in how ownership acts, it could potentially have huge impacts on the franchises. One theory would be that it would reduce gaudy contracts, since teams would be forced to make decisions that were more fiscally responsible. Maybe the San Francisco Giants ownership wouldn't have spent 126 million on Barry Zito, a move that many people believe was pushed solely by the chief owner at the time, because there would have been so much pressure by the investors to make a better deal. How can you reason to fans during rebuilding, that 126 million for a slightly above average pitcher makes sense? 

Maybe if the Oakland A's could gain some extra funding from an IPO, they too could make more moves in the market to combine with their excellent drafting and scouting. Smart investors would be able to buy low on teams with a plethora of talent down the pipe line or on teams with new owners that have a real plan to turn their franchise around. The extra funding from IPOs would be a huge help to small market teams that have good talent, because they would be able to gain new sources of cash. This might help small market teams to invest more in resigning free agents and making more "splash" moves.

Lets say all teams were public, I would be buying up these stocks:
- Tampa Bay Rays: Low payroll, strong results, solid development staff. If the franchise is sold, to a better market, stock value could shoot through the ceiling.
- OKC Thunder: Great young superstars, lots of room to grow. Potential multiple championships down the line
- Carolina Panthers: Cam Newtons potential, some nice defensive additions in the draft
- Washington Nationals: Strasburg, Harper, strong minor league system, great starting rotation.

It will be interesting to see what the future holds for sports franchises and going public, but I expect only a small minority with powerful brands will look to have their shares available to the public. I think it would be pretty cool to buy your favorite franchise during a rebuild, only to watch the stock soar when they return to greatness.

Bud Selig is destroying baseball...

There are a lot of reasons that people point to when discussing the poor decision making of Bud Selig. His biggest PR busts are likely the all star game tie and his handling of the Expos, before he shipped them off the the capitol. My biggest issue with Bud is inability to respect the traditions of baseball, when history is so important to the game itself.

I think his biggest downfall was how he handled steroids, before and after the public outing of so many cherished MLB athletes. He will likely play dumb to his death, but I find it hard to believe that Bud had no idea there was any roids in the locker rooms, when it sounds like a lot of players knew what was going on. Not to mention, he had million$ of reasons to play dumb, when Big Mac, Slammin Sammy and Bonds were breaking records left and right. What makes it so obvious that Selig didn't want to clean up the game as soon as possible, was his lame excuse of a testing program that allowed players a year of testing with no punishment before the "real" programs debut in 2005. What makes it even more interesting, is that Selig only "fought" for these new testing procedures after the public Balco scandal of 2003. This seams less that Selig had no idea and more that he felt there was nothing he could do to hide it from the public eye. His lack of initiative and decision to let steroids run their course will forever tarnish the golden years of baseball for me, watching Barry Bonds in my home park and believing that I was watching the greatest player to ever live. He either is a coward or stupid, neither strong traits for a commissioner. He will forever be the man in charge during the asterisk years, what a sad feat. 

So since Selig has to make poor decisions every year, this time around he decides last minute to add a 2nd wild card team for each league. I don't care if every other sport has at least 6 teams in the playoffs from each league, because none of them have 162 games to earn that spot or have the tradition that baseball has. It was an easy decision for Bud though, as we all know he loves cash and this will basically earn the league more playoff revenue. What is so repulsive is that the two wild card teams now get a 1 game playoff to decide their fates. 1 game, really? If there is one thing that EVERYONE knows about baseball, it is that 1 game cannot measure what team is better, even at that moment in time. This basically makes it a series of my ace vs. your ace. To make it better, the next year there will be a 3 game series, which likely will mean that the division winning playoff teams will have to wait 3-4 days to play their first playoff game. They ruined a perfect format that was exciting, for a unbalanced poorly thought out 5 team wait it out playoff. 

Also, lets not forget that Selig was commissioner during the great strike of 1994. Being the businessman and former owner that he was, Selig sided with the owners and allowed baseball to stop playing. Just to showcase how much Selig was in the owners pockets, they gave him full power on labor negotiations after giving the boot to former commissioner Fay Vincent. 

You can't put all the blame on Bud for all these happenings, but he was the head of baseball during so many poor moments in baseball history. It is his job to protect the legacy of baseball and to help grow it, both of which I can say in confidence he has not. It's too bad, because baseball has so much to offer the future generations, but it will be hard to explain why an entire generation is missing from its records and history books.