Oracle Black Swan Scenario Cuthroat Risks $ORCL, $MSFT, $RAD, $VMW, $CA, $CTXS, $FFIV, $SAP

Oracle is about to release earnings. Ponder the Black Swan calming floating nearby.

Oracle applications are legacy bound. Movement to cloud is risky and not welcome by/for many large well-paying customers. This process will go slowly as neither vendor or buyer want to move quickly and disrupt a proven thing.

Oracle has a history of slow acquisitions. Trend lines must be in dark black double lines. Cloud is an uncertain future. No one can see through the cloud. Oracle is in danger of realizing it is too far behind and then spending like a drunken sailor.

The Black Swan risk is when they realize they are too far behind and they try to spend their way out. Instead of a poker games they play roulette and buy all the red chips and all the black chips and forget about the zero.

George Gutowski writes from a caveat emptor perspective.

BlackBerry Black Swan Scenario Hacker Target of Choice $BBRY, $AAPL, $CSCO, $AMZN, $NOK, $ERIXF, $XLF, $SSNLF

BlackBerry is about to release earnings. Behold the Black Swan floating close by.

BlackBerry has been beat up is there something left. The Z10 seems to become overwhelmed and just reboots at the worst possible time; when you want to use it. It does not have the eco-system of apps as it lost its cool. It does seem to be allying itself with Amazon in some degree but we will wait and see.

BlackBerry has never been criticized for security making it a favourite in the corporate crowd who buy big volumes and settle monthly bills promptly.

BlackBerry is transitioning away from front end cool Apple like smart phones to back-end services where they should rule. Emphasis on should rule. They will now interact with several other partners whereas before they just dealt with a closed loop and were responsible unto themselves. This is a new paradigm. The culture is used to being a master in their own house. They will need to learn new ways of making friends.

While BlackBerry has an excellent rep in security as they grow closer to e-commerce they will be dealing with large amounts of currency and physical goods. Most banks have experienced security breaches. Most merchandisers have also experienced security breaches not to mention traditional inventory shrink as items disappear.

BlackBerry will become the hacker target of choice as the deep internet discerns its role in on-line commerce.

The CIA and KGB may have confidence in BlackBerry. But the Red Chinese Army unit that specializes in cyber-warfare will see it as the next target to be subverted.

George Gutowski writes from a caveat emptor perspective.

FedEx Black Swan Scenario $FDX, $UPS, $DPSGY, $KHNGY, $ROYMY, $OIL, $UNG, $USO

FedEx is about to release earnings. Ponder the Black Swan paddling gracefully just over there.

FedEx is essentially an airline that moves packages and not people. Most airlines are beset with high capital costs and poor operating performance. FedEx has a very expensive fleet which it must maintain, refurbish and replenish to avoid obsolescence. Boeing and Airbus must have a dedicated marketing team just working on the FedEx relationship.

FedEx also has the poor operating performance beat because the parcels must move whereas people do not have to travel as often and demand more price concessions.

FedEx as most airlines is inversely correlated to the price of oil. Jets and trucks all consume hundreds of thousands of gallons daily. This FedEx Achilles heel. yes they are efficient. Yes they can scan parcels multiple times along route. Yes the driver/delivery men are well spoken and courteous. But they cannot control the price of fuel. They can buy more energy-efficient modes of transport but they cannot hedge against rising energy prices. Yes there is a fuel surcharge but it has pricing elasticity problems. Not everything can be passed through.

FedEx should be investing in Tesla and anything that is green energy. They want to move away from carbon.

On balance they are controlled by carbon pricing and have not other plans.

Bad very bad.

George Gutowski writes from a caveat emptor perspective.

Yingli Green Energy Black Swan Scenario $YGE, $FSLR, $SPUR, $SHUNF, $SCTY, $CBDE

Yingli Green Energy is about to release earnings.  Follow the graceful yet dangerous Black Swan floating nearby.

Yingli is approaching a stage in development where cost efficiencies will slow down and no longer become the drivers they used to be.

Chinese banks have continued to finance bankrupt competitors which has inflated near term supply and prevented the market from becoming efficient. Yingli will be stuck in the muck with other Chinese firms.

Yingli has huge interest expenses. This mitigates any improvements in profitability. The debt may be strategically toxic.

George Gutowski writes from a caveat emptor perspective.

 

Adobe’s coming Black Swan Scenario $ADBE, $INTU, $CRM, $DASTF

Adobe is about to release earnings. Ponder the Black Swan swimming gracefully.

Adobe is attempting to convert to a subscription model. The mathematical model is elegant and compelling. But ask yourself how many users want to enslave themselves to growing monthly payments in perpetuity. To maintain the monthly billing cycle Adobe will be forced to constantly innovate and upgrade offering increasingly compelling features.

The monthly subscription renders you vulnerable to disruptive competition. A monthly charge is at risk to free or near free price competition. Adobe could face strong competition from predatory pricing.

Flash dominance continues to erode. HTML5 will continue eating it’s lunch. Subscription or not; it is going away. Apple wants to kill it.

Migrating large customers to the cloud is risky. One or two mistakes and they lose credibility followed by an exodus of customers and then declining cash flow in that very rapid order.

George Gutowski writes from a caveat emptor perspective.

 

Amazon Black Swan Event. The Coming Smartphone Debacle $AMZN, $GOOG, $AAPL, $MSFT, $YHOO, $SSNLF, $XLF, $V, $MA, $AXP

Amazon is about to launch a smart phone. They go bravely where many have failed before including Google and Microsoft. What will they offer that will be compelling and cannot be copied quickly?

Amazon is a merchant. Apple and Samsung make phones which are internet enabled. Amazon has several proprietary apps notably the Kindle for books. Amazon must defend itself against thieves and incursions. Apple and Samsung do not seem to be a front line defense against hackers. Hackers want to get into something and steal.

Amazon needs to become a payment source and draw in e-commerce. Visa and MasterCard currently rule the world with expensive merchant fees. Amazon can  should disrupt payment systems and replace the big bad rapacious banks who have gouged businesses.

Because another phone with a great screen is not what the world is waiting for. It is not what will dethrone Apple or Samsung. And if Amazon cannot dethrone Apple and Samsung it will be just another device which sells to a few quirky customers who are not economically significant.

Show me the money.

George Gutowski writes from a caveat emptor perspective.

H&R Block Bear Case Scenario for Tax Prepartion Services $HRB, $INTU

H&R Block is about to release earnings. Ponder the Bear Case Scenario with these issues.

Tax Prep services are branded commodities based on what the IRS has decided is the tax code. The question is scalability because the tax return follows the same rules as set out by the IRS. The software update is one big fixed cost so you want to sell as many copies as possible.

Basically this is a financial brand company who wants to sell huge quantities of the same product.

What’s preventing it. There are only so many tax payers who will need to file. In some countries such as Canada and Australia the markets are very small compared to America so scalability works against H&R.

The product is subject to price competition which is only a mug’s game in both the short and long run.

A big part of the offering is guaranteed returns and then offering loans against the return. This is low brow lending to the higher risk desperate wage earner. Not a growth business.

Higher net worth clients are using the service through accountants or other tax preparers who are also doing financial planning. When these financial advisors get big enough they will buy in bulk and lower margins or develop their own software and bypass H&R Block.

Growth is not exciting when considered in this light.

George Gutowski writes from a caveat emptor perspective.

Brown-Forman Bear Case Scenario $BF.A, $BF.B, $DEO, $MO, $PDRDY

Brown-Forman is about to release earnings. Ponder the Bear Case Scenario.

Brown-Forman is in the booze business err I mean drinks. That must be good right; given that drinking is pervasive. Booze is a glitz glamour fashion business. Drinks become popular and go out of fashion. Martini’s have been in and out a few times around. Vodka is a growth proposition for now. But its all about the marketing. Just think about Grey Goose Vodka from France. France has no historical connection to Vodka. Wine yes. Liqueurs  yes. But Vodka no way. Yet Grey Goose is a premium popular brand. A marketing and branding success.

This is what Brown-Forman needs to stay powerful. They essentially need to have the attributes of an Apple design team in the booze business. Brown-Forman presents itself as a manufacturer of spirits and not a purveyor of spirits. The money is in purveying. Any guy with a still can make some decent hootch once he gets the hang of the piping.

George Gutowski writes from a caveat emptor perspective.

Bear Case Scenario Hovnanian Enterprises $HOV, $DHI, $LEN, $PHM, $XHB, $XLF, $ITB, $PKB, $FLM

Hovnanian Enterprises is about to release earnings. Ponder the Bear Case Scenario:

The stock fell from mighty heights and still trades below $5. Is there anything more that can hammer this one further into the ground. The short ratio is around 11.66% give or take a margin call or two.

No one is looking at a major upswing in housing. Many mortgages are still under water. Interest rates are at historical lows so mortgage affordability is not a hindrance. Unemployment is not recovering the way we would want it to. Jobs that are being created are low wage which means no chance for mortgage.

One starts to wonder if this is not a candidate for privatization. Buy cheap, fix a few things, wait for market metrics to improve then sell big. Some of the internal financials seem to be resolving themselves but Hovnanian is still very dependent on external factors which it cannot control.

Essentially the stock is an extended commodity and or interest rate play. As rates go up more mortgages will default and new housing stock will not be needed.

The funds that own the stock are primarily ETF’s that need to be there.  However as the stock continues to get hammered it may drop far enough to lose its trading status on stock exchanges. Then the stampede will start again as everyone exits and a very deep value proposition presents itself.

George Gutowski writes from a caveat emptor perspective.

Black Swan Scenario for McDonalds, Burger King and Wendy’s $MCD, $BKW, $WEN

Large brands like McDonald’s, Wendy`s and Burger King spend as much time thinking about lawsuits as about the menu. Here is a Black Swan Scenario that will bite the entire industry by lawsuit.

You know those packets of ketchup, mustard, relish and other condiments. Well when you open and pour them out they make contact with the outside of the packaging. The outside is handled by anyone and filled with germs and bacteria. Essentially it is not sanitary. So when you dress your burger you are running the serious risk if infection and contamination.

QSR is so tied into the production efficiency of these packets they have long ceased to worry about their clients health. After all fast food is not about health; it`s about a customer experience leading to obesity, heart attack and other assorted ailments.

Wait till the smart lawyer figures this one out and sues the crap out of the entire industry.

George Gutowski writes from a caveat emptor perspective.