by Steve McDonald, Bond Strategist, The Oxford Club
Sunday, December 22, 2013
Despite a huge year for the Nasdaq Composite, up 33%, eBay (Nasdaq: EBAY) – one of the darlings of the Internet boom of the late ‘90s – has been flat. It saw spikes in the $52 to $57 area but looks to be ending the year where it started: around $52 a share.
But recent developments point toward this being an underpriced stock that will be in play in 2014.
It posted a 16% increase in earnings on a 14% increase in revenues last quarter. And the target for the stock is around $62, a 20% increase.
It has the best auction site online, and the most expensive. And it is in the process of shifting a big part of its business to an Amazon.com model – but with a kicker.
Seventy percent of sales now come from buyers clicking the “Buy It Now” button, not auctions. But the products do not come from eBay inventories, unlike Amazon, which stocks much of its products.
EBay is offering free shipping and same-day delivery in key markets and expects PayPal to add 17% a year to profits through 2015, up from 10%.
And now it is taking on Visa and MasterCard by allowing merchants to accept payment from PayPal accounts using their smartphones.
EBay is also the go-to place for the hard-to-get items this Christmas. Drawing from suppliers’ inventories is a big advantage. Of the 239 hottest items this year, there is a 28% out-of-stock rate for the major retailers. But eBay has them all, and they’re ready to ship.
EBay may have become old and boring since its wild days in the late ‘90s, and is obviously not one of the hot stocks of 2013. But there is plenty to be excited about in the new year.
A Big Opportunity in Argentina
Argentina is No. 3 in the world in shale gas reserves and No. 4 in oil. One way to play this huge reserve is with YPF (NYSE: YPF). It controls 40% of the undeveloped Vaca Muerto shale area. Its shares have doubled this year but are expected to surge as much as 200%.
Concerns about the government of Argentina are holding back investment there, but a recent analysis of YPF by Perry Capital puts the shares at $35 without any development in the Vaca Muerto shale area.
And a recent investment of $1.27 billion by Chevron in the Vaca Muerto has some analysts calling for as much as $90 a share. And that is based only on undeveloped shale assets.
Chevron must be expecting very big returns to invest over $1 billion in an unstable Argentina.
But maybe the best reason to get on board this play is that the government now owns 51% of YPF, and that means their interests are aligned with the company. And in Argentina, that means the courts will back YPF.
This is a five- to 10-year investment, but one that looks like it could be a big payoff.
The “Slap in the Face” Award: Wacky Winos
This week’s “Slap in the Face” Award goes to The Wall Street Journal for its recent article that recommended wines for a holiday dinner. This is ridiculous. I am ashamed for the Journal.
These are the wines they recommend for Christmas, and as a poor kid from a coal mining town, this one makes me ill.
The first course: a champagne that costs $469 a bottle – not a restaurant’s price, that’s the store price. Serve it with lobster or scallops.
Next up: a white burgundy for $1,084 a bottle. Again, the store price.
And finally, for the main course: a hearty but unpretentious burgundy for, I’m not making this up, $1,506 a bottle! It better have gold coins in the bottom of the bottle for that price.
Keep in mind this is wine for four to six people, for one meal, not a whole party.
$3,059 for wine for four people, for one meal?
Someone at the Journal needs a serious reality check.