How to Choose a Memory Foam Mattress?

Memory foam mattresses have gradually gone on to become the favored mattress options for a wide variety of people. Just a decade or so ago, the spring coil mattress were the preferred option. However, from the time when the concept of memory foam mattresses was introduced and ever since, the best memory foam mattresses hit the market, they have taken the lead over all other mattress types. The reason why memory foam mattresses have become the preferred option and the reason why they are the first choice for most of the buyers is because they are designed in such a manner that they conform to the shape of the body. As a result, the sleeper feels a lot more comfortable and sleeps a very sound sleep. Memory foam mattresses offer a lot of cushioning to the spine and other joints, and as a result, people who sleep on these mattresses don't feel the early morning nagging pain that comes with sleeping on other type of mattresses.

The Density of the Mattress

When it comes to choosing the best memory foam mattress, selecting the density of the mattress remains the most important decision. The reason behind this is the fact that the density of the mattress would decide how much support it would provide, how much durable, it is going to be and how much it would cost you. By choosing the memory foam mattress of the right density, you will ensure that you get the mattress which provides you apt support.

So, which density memory foam mattress would be best suited for you? There is a wide range of choices in densities when it comes to memory foam mattresses. You will find mattresses with as little density as 2.5 pounds per cubic feet to the mattresses with a density of 5 pounds per cubic feet. The important thing to understand about densities is that the higher the density of the mattress, the greater the support that it would be able to provide. Same goes for durability and pricing as well. A 5 pound density foam mattress actually last around 10 years more than a 3 pound density foam mattress. While the foam with the higher density may have the greatest durability, but it will also come for a higher price. This is because more material goes into the 5 pound density memory foam mattress as compared to the 3 pound density memory foam mattress.

If you are on a tight budget, then a 2.5-3 pounds per cubic foot mattress would do just fine. However, if you want more support and if you want your mattress to stay with you for a long time to come, opting for a mattress whose density is around 4-5 pounds per cubic feet would be the better choice.

The Foam ILD Rating

Another factor that plays an important role is the Foam's ILD rating. ILD is the short form of Indentation Load Deflection with ILDs ranging from six to forty. The best memory foam mattresses usually have an ILD of around 12-16. The ILD rating is a good measure of gauging the softness or hardness of the mattress. The ILD rating actually indicates the amount of pressure in pounds required to indent it by 25%. A foam with a 12lb ILD rating indents by 25% when a pressure of 12lb is applied while a foam with a 20lb ILD rating would require a pressure of 20lbs. Higher ILDs indicate a stronger mattress that would be harder while lower ILDs shows that the mattress is rather soft and not that firm.

Apart from the density and the ILD rating, it remains important that you choose the memory foam mattress of a reliable and reputable manufacturer. Reading reviews of other such best memory foam mattresses should help you in identifying the mattress that would best suit your requirements.

Timber Shelves and Home Office Productivity

Working from home has become a widely spread choice for many people out there. Either because it can be better paid or because it can simply be much more comfortable, working from home greatly popular out there. Even more, it is more possible than ever precisely because we are more connected to the world than we have ever been. With the Internet's ability to send a message within seconds, you will never miss out on your business partner's pleas.

Of course, working from home can be extremely beneficial and not just for one reason. For starters, you can spend more time with your family and that can be extremely important, especially if you have small children. Furthermore, you can adjust your schedule according to your needs and you can run other errands as well.

At the same time though, working from home comes with certain disadvantages. One of the most important ones is that you can start feeling easily distracted by a lot of things. The Internet is not only great for communication, but it can provide you with easy to access entertainment and socialization, which makes it much more difficult to concentrate. While you may not be able to cut off yourself completely from online distractions, what you can do is make sure that no other types of distractions get in between you and your work.

If you want to be truly productive in your home office, you will have to create the ambiance of a real office and you will have to remove all potential distractions. That includes a proper decoration and a proper organization of the things in your office. Consequently, that means that you will have to allow yourself some proper time to think about your shelving options, since the right choice could make for the success of the entire redecoration process.

Timber shelves can be a great option for your home office and there are multiple reasons for which you should definitely consider this. For starters, they look absolutely gorgeous and they are more than suitable for the atmosphere of an office. There is something about real wood that gives elegance and a note of prestige to a room, especially when it comes in darker colors. Thus, you will create the perfect ambiance for your productivity and if you ever have to receive one of your partners or clients in your home office, you will send a positive message: that of reliability and steadiness.

Secondly, timber shelves can be great for your home office and they can increase your productivity because they can be customized according to your needs. No more throwing files and documents around from now on! You will have your own space to store all the important paperwork your entire business relies so much upon. You will have the chance of organizing everything perfectly and not wasting time any longer on simply trying to find that one important document at the end of the pile. That means that you will eventually increase at least a bit of your productivity as well.

Bona Film Group's CEO Discusses Q4 2013 Results - Earnings Call Transcript

Executives

Brandi Piacente - IR, The Piacente Group

Yu Dong - Founder, Chairman and CEO

Jeffrey Chan - Chief Operating Officer

Amy Xu - Chief Financial Officer

Analysts

Doug Creutz - Cowen

Bona Film Group Limited (BONA) Q4 2013 Earnings Conference Call February 27, 2014 8:00 PM ET

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Bona Fourth Quarter and the Full Year 2013 Earnings Conference Call. (Operator Instructions) I must advise you this call is being recorded today at February 28, 2013.

I'd now like to hand the conference over to your presentation for today, Ms. Brandi Piacente. Ms., please carry one.

Brandi Piacente

Thank you. Hello, everyone, and welcome to Bona Film Group Limited's fourth quarter and full year 2013 earnings conference call. The company distributed its earnings press release earlier today, and you could find a copy on Bona's website, ir.bonafilm.cn. On our call today are Bona's Founder, Chairman and CEO, Yu Dong; COO, Jeffrey Chan; and CFO, Amy Xu. After the company's prepared remarks, management will be available to answer your questions.

Before we begin, please note that the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may differ materially from the views expressed today. Further information regarding these and other risks and uncertainties are included in the company's Annual Report on Form 20-F for the fiscal year ended December 31, 2012, and in other documents filed with the U.S. Securities and Exchange Commission. Bona does not assume any obligation to update any forward-looking statements except as required under applicable laws.

As a reminder, this conference call is being recorded. In addition, an audio webcast of this conference call will be available on Bona's Investor Relations website.

I will now turn the call over to Bona's Founder, Chairman and CEO, Mr. Yu Dong.

Yu Dong

Good day, everyone, and thank you for joining our fourth quarter and full year 2013 earnings conference call. I am pleased to say that Bona delivered solid results in the fourth quarter and full year 2013. In the fourth quarter, we generated revenue was $42.8 million with non-GAAP net income of $1.5 million. And for the full year 2013, we generated revenue of $149.3 million with non-GAAP net income of $8.5 million, representing 165.5% growth year-over-year.

2013 was a successful year for Bona as we delivered solid financial results and completed several strategic initiatives. We maintained the leading position among non-state-owned film distributors in terms of box office and made significant progress in all of our business segments. More importantly, in 2013, we also significantly strengthened our corporate structure through the successful launch of RMB1 billion Bona Film Investment Fund, the strategic investment in our company by Fosun Group and the procurement of two credit facilities, a RMB200 million agreement from China Minsheng Bank and a RMB80 million agreement from Shanghai Pudong Development Bank. These corporate activities enhanced our operations last year and bolstered our ability to achieve our strategic goals in 2014.

For the full year 2013, Bona distributed and invested in a total of 18 films, 14 of which were for domestic theatrical distribution and generated a total of RMB1.3 billion in box office receipts, representing an 89% growth year-over-year. This equates to an approximately 10% market share in terms of total domestic box office, making us one of the top three domestic non-state-owned film distributors.

In the fourth quarter, Bona distributed three new films, The White Storm, Red 2 and The Game of Hide and Seek; as well as Out of Inferno, which we released on the last day of September. These four films delivered box office receipts of RMB415.4 million. The White Storm was our best performing film in the quarter, generating domestic box office receipt of RMB225.3 million. Directed by Benny Chan and starting Sean Lau, Louis Koo and Nick Cheung, the movie premiered as the opening film of the 2013 Hong Kong Asian Film Festival and was the first Chinese language film chosen to close the Rome International Film Festival.

Turning to our theater business, as of the end of 2013, Bona operated 22 company-owned movie theaters with a total of 182 screens. We generated net revenues of $61.5 billion from the theater segment for the full year 2013, representing a 47.5% improvement over 2012. During the quarter, we opened two new movie theaters in Shandong Zibo, Shenzhen Huangting, which added 19 screens and 2,822 seats to the Bona theater network. More importantly, in 2013, we signed contracts to construct seven new theater projects and reached preliminary strategic agreements with first tier property developers, including Fosun Group, Capital Land, (inaudible) and Yintai. As you can see, we have a number of exciting future projects in the theater segment pipeline and we expect to open another six to eight theaters during 2014.

Now let's look at our production business. In 2013, Bona participated in the production of over 10 films. During the fourth quarter, we began production on the highly anticipated 3D IMAX epic, The Taking of Tiger Mountain, formerly called Tracks in the Snowy Forest, directed by Tsui Hark and produced by Jian-Xin Huang. The Taking of Tiger Mountain is based on an extremely well known Chinese folk tale called Tracks in the Snowy Forest. Known for his mastery of 3D technology and expertise in martial arts movies, Tsui Hark plans to combine classic Chinese literature with the most advanced visual effects to create a blockbuster that appeals to a wide range of audiences.

The production process has been going well and it will no doubt be one of the biggest blockbusters in our current slate. We also successfully completed production work on Derek Erh's drama, I Am Somebody, a story about young aspiring film actress chasing her movie dreams at the Hengdian studios. Director Erh's next project, Swordmaster is also currently in the preparation stage and is tentatively scheduled to start shooting in the second half of 2014.

Additional films undergoing the post-production stage in the fourth quarter included the last installment of our popular Overheard franchise. Overheard 3; the 3D epic drama, The White Haired Witch, which was directed by Jacob Cheung and stars Huang Xiaoming and Fan Bingbing; the suspense drama, Insanity, directed by David Lee and starring Sean Lau and Huang Xiaoming; and the crime drama, Sunspot, directed by Cao Baoping and starring Deng Chao, Duan Yihong and Wang Luodan among others.

Lastly, during the fourth quarter, we also put the final touches on our first film release for 2014, The Man From Macau, which was released to coincide with commencement of Chinese New Year. Directed by Wong Jing and starring Chow Yun-Fat and Nicholas Tse, The Man From Macau successfully received box approval, paving the way for exceptionally strong box office performance to date.

Bona's distributed films were also recognized for numerous domestic and international awards in 2013. In the fourth quarter, the Bona distributed films, A Simple Life, Flying Swords of Dragon Gate, The Grandmasters and (inaudible) were awarded outstanding Chinese actress with foreign nationality, outstanding use of technology, outstanding co-production and outstanding animation respectively at the 15th China Huabiao Awards Ceremony.

Several other Bona distributed films earned accolades in 2013, including Zhang Ziyi received the best actress award for her performance in The Grandmasters at the 50th Taipei Golden Horse Film Festival. Unbeatable's lead actress Nick Cheung and Crystal Lee received best actor and actress awards at the 16th Shanghai International Film Festival.

And three, a Bona distributed film, The Grandmasters, Unbeatable and The White Storm received recently a total of 33 nominations for the upcoming 33th Hong Kong Film Awards, making Bona the biggest potential winner of the year at this prestigious event.

Looking back at 2013, the Chinese film market had another very good year, with box office receipts continuing to show strong growth and momentum for the future. Full year box office receipts in China reached RMB21.8 billion, representing 25.7% growth year-over-year. Domestic Chinese films represented 59% of the total market share with RMB12.8 billion of box office receipts compared to 41% market share for imported films. The growth rate for the Chinese film market in 2014 to date is even stronger than in previous years with February single month's box office receipt already exceeding RMB3 billion, which is the equivalent of the entire year's box office results for 2007.

With such favorable market momentum, Bona aims to capitalize on these advantageous market conditions by further leveraging a rich industry experience and maximizing our integrated business model.

As we look out at 2014, Bona has an exceptionally strong slate of more than 10 films in our pipeline, including The Taking of Tiger Mountain, The White Haired Witch, Overhear 3, I Am Somebody, Insanity and Sunspot among others. In addition, we have purchased a couple of high-quality Hollywood films, including the action thriller Nonstop and the 3D adventure of Pompeii, for which we are pursuing quarters and our COO Jeffrey will discuss in greater detail shortly.

So far in 2014, we have already successfully distributed The Mortal Instruments: City of Bones and The Man From Macau and have posted strong box office results. As such, I have confidence that our outstanding pipeline of high-quality films for 2014 will provide an exceptionally solid foundation for us to reach our long-term strategic goals.

Looking ahead, we believe that our clear vision, tangible targets, strong domestic and international partners and a focus on high-growth markets make Bona well positioned to achieve further growth and long-term success. I would like to take this opportunity to thank Bona's employees, partners and shareholders for the consistent support for our company and I look forward to sharing Bona's progress with you in the future.

And now I would like to turn the call over to our COO, Jeffrey Chan for our operational highlights. Jeffrey?

Jeffrey Chan

Hello to everyone on the call. 2013 was an exciting and successful year for Bona. Looking at year ahead and exceptionally strong films and thanks to the launch of the Bona Film Investment Fund and the increasingly strong Bona brand name, we have been able to continue to attract some of the most highly valued Chinese film industry today.

2014 is off to a good start. The two films we have released in the first quarter to date have performed well. On January 3rd, we released The Mortal Instruments: City of Bones, the first installment in the young adult franchise based on the best friction series written by an American author Cassandra Clare. The film features a young up and coming Hollywood star, English-speaking Chinese actor, Godfrey Gao.

On January 31st, the start of the Chinese New Year celebration, we released The Man From Macau, a nostalgic yet completely new interpretation of the popular God of Gamblers series on the early 1990s. This comedy utilized state-of-the-art technology and provides stunning images of extravagant gambling floors in Macau. Director Wong Jing enthusiastically talked on the topic that has long been missing from Chinese (inaudible). And the Man from Macau has already surpassed its personal box office record as the film has already exceeded RMB500 million in the domestic box office receipt.

We also plan to distribute a comedy Horseplay on March 21st. The film tells the story of a TV hostess played by Kelly Chen, a multi-faced thief played by Tony Leung and a washed out police detective played by Ekin Cheng who must work together to obtain a valuable Tang Dynasty Pottery Horse. Directed by Lee Chi Ngai and filmed largely in Prague and London, Horseplay aims to be a crowd-pleaser and its theme song was already well received at a CCTV New Year gala for the Chinese New Year of the Horse broadcast across the country.

Beyond the first quarter, we are particularly excited about projects in our upcoming slate, and I am going to walk you through with some more details. First, The White Haired Witch, a 3D romance based on the famous martial art saga features an exceptionally strong cast. Directed by Jacob Cheung and featuring art direction by an academy award winner team, this touching film promises a first rate visual experience.

Second, Overheard 3, co-directly by Alan Mak and Felix Chong and starring Sean Lau, Louis Koo, Daniel Wu, and Lau Ching, is next installment in our Overheard franchise. This edition of a series explored the inside story of Hong Kong's real estate business, an attention-grabbing topic that's seldom explored in Chinese cinema.

Third, Sunspot, a crime drama directly by mainland writer turned director Cao Baoping, stars some of today's most popular mainland Chinese actors, including Deng Chao, Wang Luodan, Duan Yihong. This captivating story based on the best-selling Chinese novel will make audience (inaudible) and redemption.

Fourth, Insanity is a psychological thriller starring Huang Xiaoming as a young hotshot psychiatrist who comes face to face with a violent yet devilishly intelligent psychopath played by Sean Lau. Producer Derek Erh worked closely with writer/director David Lee to set the stage for this crime drama.

Fifth, Daydream Believer is a light-hearted comedy that tells a story of four male roommates desperately trying to shed their single status before college graduations. With humor similar to the American Pie franchise, the film features a widely popular cast including (inaudible), all of who have strong appeal with the young Chinese audiences.

Six, I Am Somebody, a (inaudible) reality project from producer/director Derek Erh, all self-acclaimed of several wannabe actors with dreams of one day becoming big stars and reviews a little known world of film extras in China. It is a dream come true story that will (inaudible) millions especially the post-'90 generations.

Seventh, The Taking of Tiger Mountain is Tsui Hark's interpretation of one of the most well known Chinese stories from the revolutionary period. Incorporating 3D action technology, Tsui remakes this classic in the James Bond-style world blockbuster featuring Zhang Hanyu, Tong Liya and other A-list cast are expected to fascinate audience.

Eight, Swordmaster is director Derek Erh's upcoming project with his first film in 3D. It holds great personal significance for him as he achieved his early fame as an actor playing the swordmaster himself. Produced by Tsui Hark and based on (inaudible) Swordmaster is not only being developed as the movie, but we are also preparing a TV series under the same title. We believe these two projects will create synergies and stay up around our sword mastery themes in China.

Additionally, I'm pleased to introduce two foreign films that we are currently pursuing for this fall. First, Nonstop is an action thriller that tells the story of an air marshall who must spring into action aboard an international flight when an unknown terrorist threatens to kill every 20 minutes. The film features a top Hollywood cast including Liam Neeson, Julianne Moore and Downton Abbey's' Michelle Dockery.

Second is Pompeii. It's an action-packed saga that uses 3D technology to tell the story of a catastrophe that (inaudible) Pompeii. The film focuses on the relationship between Games of Throne star Kit Harington and his love interest Emily Browning.

Another operational initiative I would like to highlight is the restructuring of bonus distribution teams. At the end of 2013, we systematically reviewed the distribution business segment and decided to take on the new organization structure in 2014. By establishing new Northeastern Central and Southeastern distribution offices and solidifying our existing Eastern and South Southern branches, we aim to further expand bonus distribution coverage to fully leverage the regional distribution resources of the 22 Bona-owned theaters and eliminating major blind spots in our national coverage.

Additionally, we expect this new structure to supplement and fortify our efforts to China's booming second and third tier cities, which are becoming increasingly important box office contributors. We believe these changes will enhance both the size and capabilities of our distribution teams and provide us with a greater competitive advantage in 2014, allowing Bona to make the most of our strong slated films this year.

With that, I would like to turn to our CFO, Amy Xu. Amy?

Amy Xu

Thank you, Jeffrey, and hello to everyone on the call. I would now to provide a brief overview of our financial results for the fourth quarter and full year of 2013. Please note that all numbers I will discuss today are in US dollars unless otherwise noted.

First, net revenue for the fourth quarter of 2013 were $42.8 million, which is 19.7% lower than the fourth quarter last year. Revenues were lower year-on-year because Bona did not release any TV series in the fourth quarter of 2013 compared with sales generated from Bona's TV series, The King's Battle in the fourth quarter of 2012.

On segment basis, total net revenues from the distribution, investment and production and the movie theater segments were $27.7 million, $3.3 million and $15.4 million respectively in the fourth quarter of 2013. This compares to $8.7 million, $37.4 million and $13.1 million respectively in the fourth quarter last year.

Gross profit for the fourth quarter of 2013 was $16.9 million, an increase of 67.2% year-over-year. This increase in gross profit was primarily attributable to the strong box office performance of Out of Inferno and The White Storm compared with lower gross margin in the fourth quarter of 2012 that resulted from the higher salvation of amortization of production costs based on the economy performance and public acceptance of certain films, the impairment of product cost using a discounted cash flow approach and a lower than expected box office performance from The Last Tycoon.

Gross margin for the fourth quarter of 2013 was 39.5% compared with 19% for the fourth quarter of 2012. Total operating expenses including participation expenses, general and administrative expenses and selling and marketing expenses for the fourth quarter of 2013 were $16.9 million, a decrease of 10% year-over-year. The year-over-year decrease in operating expense was primarily due to the decrease in selling and marketing expense for the promotion and advertising of the company's four films released in the fourth quarter of 2013 compared with three films and one TV series released in the fourth quarter of 2012.

Operating income for the fourth quarter of 2013 was $3.3 million compared with an operating loss of $5.7 million in the same quarter a year ago. Operating margin for the fourth quarter of 2013 was 7.8% compared with negative 10.7% in the fourth quarter of 2012. The improvement in operating margin in the fourth quarter of 2013 was primarily due to the strong performance of The White Storm and Out of Inferno.

Net income attributable to Bona Film Group Limited for the fourth quarter of 2013 was $400,000 compared with a net loss of negative $5.4 million in the same time year ago. Net income attributable to Bona Film Group Limited per ADS for the fourth quarter of 2013 was $0.01 basic and diluted compared with negative $0.09 in the same time a year ago.

Excluding share-based compensation of $1.2 million, our non-GAAP net income for the fourth quarter of 2013 was $1.5 million. Non-GAAP net income attributable to Bona Film Group Limited per ADS for the fourth quarter of 2013 was $0.03 basic and diluted.

Excluding interest, tax, depreciation and amortization, our non-GAAP EBITDA was $7 million for the fourth quarter of 2013, which compares with non-GAAP EBITDA loss of $2.4 million for the same period last year.

Cash and cash equivalents, term deposits and restricted cash as of the 31st of December 2013 totaled $63.4 million. Operating cash flow for the fourth quarter of 2013 was a net inflow of approximately $9.5 million, which related to the receipt from several TV series.

Turning now to our full year 2013 financial results. Net revenue for the full year 2013 were $149.3 million, an increase of 5% year-over-year. Our full year 2013 performance improvement was primarily attributable to an increase in revenue from the company's movie theater segment and better box office performance by the 14 films theatrically released in 2013 compared with 2012.

Total net revenues generated by our film distribution segment in 2013 totaled $76.6 million compared with $64.1 million generated by this segment in 2012. Total net revenues generated by the investment and production segment in 2013 was $41 million compared with $73.7 million in a year-ago period. Total net revenues derived from the movie theater segment were $61.5 million for the full year 2013 compared with $41.7 million for the full year 2012.

As a reminder, total net revenues included into segment revenue of $2 million in our film distribution segment and $28.4 million in our film investment and production segment.

Gross profit for the full year 2013 was $66.5 million, an increase of 18.3% year-over-year. This increase in gross profit was primarily attributable to strong performance for four of our films released in 2013 and the expansion of Bona old movie theaters. Gross margin for the full year 2013 was 44.5% compared to 39.5% for the full year 2012.

Segment profit margin for our film distribution segment was 30.1% in 2013 and profit from this segment accounted for 34% of the consolidated segment profit for the full year. The segment profit margin for our investment and production segment was 21.1% in 2013 and the profit for this segment represented 12.7% of the consolidated segment profit for the full year. The segment profit margin for our movie theater segment was 57.7% and profit for this segment accounted for 52.4% of the consolidated segment profit for the full year 2013.

Total operating expenses including participation expenses for the full year 2013 were $62.9 million, an increase of 3.4% year-over-year. The year-over-year increase in operating expense was primarily due to a decrease in selling and marketing expenses for the promotion and advertisement of company's distributed films offset by the increase in general and administrative expenses related to the expending one-off movie theater segment.

Operating income for the full year 2013 was $8.6 million. Operating margin for the full year 2013 was 5.8%, which compares with negative 0.5% operating margin for the full year 2012. The improvement in operating margin for the full year 2013 was mainly due to the strong performance of the films released in the second half of 2013 and our greenfield theaters gradually maturing in 2013. We opened two new theaters in Shandong Zibo and Shenzhen Huangting in 2013.

Net income attributable to Bona Film Group Limited for the full year 2013 was $5.7 million compared with net loss of $1.3 million for the same time a year ago period. Net income attributable to Bona Film Group Limited per ADS for the full year was $0.09 basic and diluted compared with a net loss per ADS for the full year of 2012 of negative $0.02 basic and diluted.

Excluding share-based compensation, our non-GAAP net income for the full year 2013 was $8.5 million compared with non-GAAP net income of $3.2 million for the full year 2012. Non-GAAP net income attributable to Bona Film Group Limited per ADS for the full year 2013 was $0.16 basic and diluted compared with $0.06 basic and diluted for the full year 2012. Excluding interest, tax, depreciation and amortization, our non-GAAP EBITDA was $20.4 million for the full year of 2013.

Operating cash flow for the full year 2013 was a net outflow of approximately $21.6 million, which relates to the investment in several films released in 2013 or scheduled for release in 2014.

Now turning to our guidance, based on current market and operating conditions, we expect our non-GAAP net income for the first quarter of 2014 to be between $1 million to $1.5 million. Brandi, over to you.

Brandi Piacente

Operator, I think that we will turn the call over for questions now.

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ModernGraham Quarterly Valuation Of General Electric

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk. This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company. By using the ModernGraham method one can review a company's historical accomplishments and determine an intrinsic value that can be compared across industries. What follows is a specific look at how General Electric fares in the ModernGraham valuation model.

GE data by YCharts

Defensive Investor - must pass at least 6 of the following 7 tests: Score = 6/7

1. Adequate Size of Enterprise - market capitalization of at least $2 billion - PASS


2. Sufficiently Strong Financial Condition - current ratio greater than 2 - PASS


3. Earnings Stability - positive earnings per share for at least 10 straight years - PASS


4. Dividend Record - has paid a dividend for at least 10 straight years - PASS


5. Earnings Growth - earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - FAIL


6. Moderate PEmg ratio - PEmg is less than 20 - PASS


7. Moderate Price to Assets - PB ratio is less than 2.5 or PB x PEmg is less than 50 - PASS

Enterprising Investor - must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

1. Sufficiently Strong Financial Condition, Part 1 - current ratio greater than 1.5 - PASS


2. Sufficiently Strong Financial Condition, Part 2 - Debt to Net Current Assets ratio less than 1.1 - PASS


3. Earnings Stability - positive earnings per share for at least 5 years - PASS


4. Dividend Record - currently pays a dividend - PASS


5. Earnings growth - EPSmg greater than 5 years ago - FAIL

Valuation Summary

Key Data:

Recent Price	$25.47
MG Value	$3.77
MG Opinion	Overvalued
Value Based on 3% Growth	$19.27
Value Based on 0% Growth	$11.29
Market Implied Growth Rate	5.33%
NCAV	-$10.31
PEmg	19.17
Current Ratio	2.04
PB Ratio	1.96

Balance Sheet - 12/31/2013

Current Assets	$422,303,000,000
Current Liabilities	$206,572,000,000
Total Debt	$221,665,000,000
Total Assets	$656,560,000,000
Intangible Assets	$91,958,000,000
Total Liabilities	$525,994,000,000
Outstanding Shares	10,060,880,000

Earnings Per Share

2013	$1.47
2012	$1.39
2011	$1.23
2010	$1.15
2009	$1.03
2008	$1.78
2007	$2.20
2006	$1.99
2005	$1.72
2004	$1.59
2003	$1.55
2002	$1.52

Earnings Per Share - ModernGraham

2013	$1.33
2012	$1.28
2011	$1.31
2010	$1.44
2009	$1.64
2008	$1.91

Dividend History

GE Dividend data by YCharts

Conclusion:

General Electric appears suitable for either the Defensive Investor or the Enterprising Investor; however, the lack of earnings growth is a serious concern for either investor type. The Defensive Investor is disappointed in the insufficient earnings growth over the ten year historical period and the Enterprising Investor is frustrated by the lack of growth over even a five year historical period. Both investor types should keep the company on their watch lists, but should also check out other opportunities such as by reviewing 5 Undervalued Companies for the Defensive Investor and 5 Undervalued Companies for the Enterprising Investor.

From a valuation perspective, the lack of earnings growth plays a big factor. The company has seen a drop in EPSmg (normalized earnings) from $1.64 in 2009 to $1.33 for 2013. Until the earnings improve, the company's historical performance does not support the market's implied growth estimate of 5.33%. As a result, the ModernGraham valuation model returns an estimate of intrinsic value that is below the current price, indicating the company is overvalued.

The next part of the analysis is up to individual investors, and requires discussion of the company's prospects. What do you think? What value would you put on General Electric? Where do you see the company going in the future? Is there a company you like better?

Disclosure: The author did not hold a position in General Electric (GE) or any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.

Source: ModernGraham Quarterly Valuation Of General Electric

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Drought Hits American Pickup Trucks

The recent drought in California has affected everything from tomato prices to wine sales. Another victim perhaps will be the pickup truck--specifically those of Ford (F) and General Motors (GM).

The State of California is the nation's largest agricultural producer at $44.7 billion a year. The California Farm Water Coalition anticipates a $5 billion hit in 2014 from lost revenue--about a 9% loss. Ryan Jacobsen, the executive director of the Fresno County Farm Bureau, expects that 25% of irrigated field and orchards in the county will lay unplanted. That's a big decrease in farmers' pocket money.

California Farmers own 57% of all trucks and pickups used on farms. Mark Fields, Ford Motor Co.'s president of the Americas, has said that

When farmers have a good harvest, they invest in their businesses and a pickup is a tool.

And obviously, the opposite is also true. Following a 2012 drought in the Midwest, pickup sales dropped 15%, which was attributed to a large drop in overall revenue:

(click to enlarge)

Farmer Clay Kelly says that

When folks get a good crop, everybody gets a new pickup truck. There's not going to be many new pickup trucks running this year.

In fact, around 37% of agricultural workers buy a new truck once every three years. Ford's SuperDuty trucks' motto is "We Own Work," clearly catering to farmers and other blue collar workers. Although Ford and GM (who have a combined 70% market share in American pickup sales) had their best year in 2013 since the 2008 recession, they will only see the potential impact after the farming season is over this spring.

Autoguide describes the pickup truck as:

an icon that embodies the working spirit. It's every blue collar employee's calling card and farmer's best friend. Truck buyers grow especially close to their vehicles as trucks are a key tool in earning a living, depending on them to last through days and years of service.

This man-and-machine relationship breeds intense brand loyalty, with some families staying true to a brand for years. When a farmer is given the choice to buy a new pickup from an American company or a foreign one, like Toyota Motors (TM), he will probably select the American one. Nearly every farmer has acquaintances who work at these American motor factories, and wish for them to retain their jobs. The chart below shows the dominance of American companies, specifically that of Ford.

So when farmers have weak harvests and lower-than-usual income, they are less inclined to buy a new version of a pickup truck, and decide to make-do with their current one. Ford and GM should see rather significant long-term drops in the coming months that can potentially last until the holiday season (when most cars are sold) when a rebound is possible.

Source: Drought Hits American Pickup Trucks

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

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Stay Bullish On Nvidia

The share price of Nvidia (NVDA) has gone up by 19% since early February, compared to a 6% return for S&P 500 Index. It is now trading near its 52-week high at $19.05. Given the company's healthy fundamentals, robust growth opportunities, and inexpensive valuation, I believe there remains a significant room for price appreciation.

In 2013, Nvidia's PC GPU business significantly outperformed the PC market, as the company's GPU revenue grew by 7% year-on-year, compared to a 10% decline in PC shipment. Management noted that the strong result was primarily driven by the company's high-end GPU business. This suggests that resiliency of the high-end GPU market remains solid amid the tablets' cannibalizing trend. I believe many investors' view that Nvidia is a PC company that would face significant headwinds from mobile devices is inappropriate; the stock's current valuation does not appear to reflect that.

Looking forward, I believe the following positive catalysts to continue driving a meaningful price upside:

• The company's GRID trials in Q4 2014 increased by 46% sequentially, up from a growth rate of 40% in Q3 2014. Management suggested that the GRID business continued to experience strong momentum with hundreds of customers currently evaluating the technology. Given management's estimated total addressable market value of $10B for GRID and the current momentum, I view this business to be a long-term growth driver for Nvidia going forward.

• The Tegra business is also on a strong momentum as the segment revenue grew by 18% sequentially in Q4 2014, driven by increased shipments for mobile devices. At CES in January, the company highlighted its next-generation Tegra K1. Management also noted that Tegra 4i was certified by AT&T (T) and Vodafone (VOD) in Q4 and expected product announcements in the first half of F2015. It is believed that these new product ramp-up should drive material growth for this segment in near term.

• In addition, the Tegra automotive business grew 60% year-on-year in Q4. Management noted a Tegra K1 design win with Audi in the quarter and expected that the company is well positioned to make additional design wins in F2015.

Driven by solid cash generation (and a convertible debt issuance in Q4 2014), Nvidia's cash balance has steadily increased from $0.7B to $4.7B over the past 10 fiscal years (see chart below), and the company's current net cash of $3.3B represents approximately 32% of market capitalization. The company repurchased $37M shares in Q4 2014 and reiterated their target to return $1B to shareholder through both dividend and share buyback in F2015, which is almost 10% of the current market capitalization. It is expected the shareholder-friendly policy should somewhat mitigate downside price risk.

On the valuation front, despite the recent run-up, the stock's 2015 forward P/E multiple of 16.2x is just 3% above the same multiple of S&P 500 Index at 15.7x (see chart below).

(click to enlarge)

Given that 1) the valuation premium averaged at 3% in the past 12 months; 2) Nvidia's consensus long-term earnings growth rate at 11.1% exceeds the average estimate of 9.5% for S&P 500 companies; and 3) the stock offers a 1.8% dividend yield, which is comparable to S&P 500's average at 1.9%, I view the stock's current relative valuation to be inexpensive. Factoring in the long-term earnings growth potential, Nvidia trades at 1.5x PEG, which is at 12% discount to S&P 500's PEG of 1.7x.

In summary, given Nvidia's solid PC business and its promising growth prospects driven by Tegra and GRID ramp-up, the current inexpensive valuation alongside management's capital return plan should suggest a favorable risk-reward trade. The stock is a buy at this level.

All charts are created by the author and data used in the article and the charts is sourced from S&P Capital IQ, unless otherwise specified.

Source: Stay Bullish On Nvidia

Disclosure: I am long NVDA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

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Home Loan Servicing Solutions: 3 Different Insiders Have Purchased Shares During The Last 30 Days

In this article, I will feature one financial stock that has seen intensive insider buying during the last 30 days. Intensive insider buying can be defined by the following three criteria:

1. The stock is purchased by three or more insiders within one month.


2. The stock is sold by no insiders in the month of intensive purchasing.


3. At least two purchasers increased their holdings by more than 10%.

Home Loan Servicing Solutions (HLSS) engages in the acquisition of mortgage servicing assets.

(click to enlarge)

Insider buying during the last 30 days

Here is a table of Home Loan Servicing Solutions' insider-trading activity during the last 30 days.

Name	Title	Trade Date	Shares Purchased	Current Ownership	Increase In Shares
Robert McGinnis	Director	Feb 27	2,000	14,500 shares	+16.0%
James Lauter	CFO	Feb 20	2,000	12,000 shares	+20.0%
John Van Vlack	President	Feb 19	8,495	125,000 shares	+7.3%

There have been 12,495 shares purchased by insiders during the last 30 days.

Insider buying by calendar month

Here is a table of Home Loan Servicing Solutions' insider-trading activity by calendar month.

Month	Insider buying / shares	Insider selling / shares
February 2014	12,495	0
January 2014	0	0
December 2013	0	0
November 2013	0	0
October 2013	0	0
September 2013	0	0
August 2013	3,550	0
July 2013	0	0
June 2013	0	0
May 2013	11,955	0
April 2013	750	0
March 2013	0	0
February 2013	8,000	0
January 2013	0	0

There have been 36,750 shares purchased, and there have been zero shares sold by insiders since January 2013. The month of February 2014 has seen the most insider buying.

Financials

Home Loan Servicing Solutions reported the full-year 2013 financial results on February 6 with the following highlights:

Revenue	$249.9 million
Net income	$127.7 million
Book value	$17.37 per share

(click to enlarge)

(Source: Earnings presentation)

Competition

Home Loan Servicing Solutions' competitors include Annaly (NLY), and Hatteras (HTS). Here is a table comparing these companies.

Company	HLSS	NLY	HTS
Market Cap:	1.46B	10.59B	1.91B
Employees:	18	147	N/A
Qtrly Rev Growth (yoy):	2.00	-0.26	N/A
Revenue:	249.87M	3.81B	184.84M
Gross Margin:	0.99	1.00	1.00
Operating Margin:	0.91	0.95	0.85
Net Income:	127.69M	3.33B	-156.06M
EPS:	1.99	3.45	-1.59
P/E:	10.31	3.24	N/A
PEG (5 yr expected):	1.96	2.73	N/A
P/S:	5.84	2.78	10.24
Short Float:	2.47%	3.03%	3.59%

Home Loan Servicing Solutions has the lowest short float among these three companies.

Here is a table of these competitors' insider-trading activities during the last six months.

Company	Insider buying / shares	Insider selling / shares
NLY	238,406	0
HTS	12,400	0

Only Home Loan Servicing Solutions has seen intensive insider buying during the last 30 days.

Conclusion

There have been three different insiders buying Home Loan Servicing Solutions, and there have not been any insiders selling Home Loan Servicing Solutions during the last 30 days. Two of these three insiders increased their holdings by more than 10%. Home Loan Servicing Solutions has an insider ownership of 0.20%.

The insiders purchased their shares at prices ranging from $19.91 to $20.63. I believe Home Loan Servicing Solutions could be a good pick below $20 based on the intensive insider buying.

Source: Home Loan Servicing Solutions: 3 Different Insiders Have Purchased Shares During The Last 30 Days

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in HLSS over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

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Count To 20 Mississippi, Then Buy Tesla

Tesla (TSLA) short sellers finally got a little help this weekend. It's likely been a long, hard, cold road for them as they've watched the stock rocket over 600% in the last year.

(click to enlarge)

And, interestingly enough, the news that might move the needle for short sellers doesn't even have anything to do with Tesla - it has to do with the Ukrainian/Russian conflict overseas. I'm predicting Asia and Europe will telegraph a pullback in the U.S. Markets to start the upcoming week.

My history with Tesla? I've been bullish on the stock since I started writing about it in 2013. I really think they're cooking something up; Tesla has met or exceeded all goals they've set out for and, until CEO Elon Musk gives me a reason not to, I trust in the job he's doing.

But, enough wasting time on Tesla shorts that have had their heads stomped in. Let's talk bullish. A pullback as a result of a broad market pullback could present a great entry point for Tesla. It's just a matter of letting it play out, if a pullback happens.

In January of this year, about 7 weeks ago, I wrote an article called "Tesla's Hidden Revenue Byproducts", which laid out the bullish catalyst for Tesla's stock 7 weeks ahead of time:

In all of the valuations of Tesla, people are focused on the production and sale of vehicles. But, you have to ask - when pushing the front of a semi-emerging market (electric vehicles), what kind of price can you put on the solutions that Musk and his team are coming up with as they encounter challenge after challenge. And, furthermore, how many of these solutions will hold monetary value once Tesla is established and others start to follow in its path?

As a logical connection to Tesla solving its own production problems comes another benefit: Tesla could hold IP or patents on certain electrical car based problem that they could either license or outright provide to other electric car makers. For instance, the battery issue - if Tesla develops and engineers in house solutions for its battery, don't you think other electric vehicle makers are going to want to apply the same technology to their vehicles?

That brings us to the Gigafactory - a factory that is supposed to produce lithium ion batteries at a rate that will blow current worldwide production out of the water.

This is what Tesla says about the Gigafactory, from their own website:

As we at Tesla reach for our goal of producing a mass market electric car in approximately three years, we have an opportunity to leverage our projected demand for lithium ion batteries to reduce their cost faster than previously thought possible. In cooperation with strategic battery manufacturing partners, we're planning to build a large scale factory that will allow us to achieve economies of scale and minimize costs through innovative manufacturing, reduction of logistics waste, optimization of co-located processes and reduced overhead.

The Gigafactory is designed to reduce cell costs much faster than the status quo and, by 2020, produce more lithium ion batteries annually than were produced worldwide in 2013. By the end of the first year of volume production of our mass market vehicle, we expect the Gigafactory will have driven down the per kWh cost of our battery pack by more than 30 percent. Here are some details about what the Gigafactory will look like.

Some analysts, like Joann Muller at Forbes, thinks the trickle down from the Gigafactory will be so substantial that it could save the U.S. battery business. Siddharth Dalal just penned a great article exploring, in depth, how profitable Tesla's SuperChargers can be. If you're looking for a little QA behind the estimates regarding Superchargers, give his article a read. He thinks that Tesla could have the highest margins per vehicle in the auto industry [more than GM (GM/Ford (F)] in the coming years.

It's interesting that it moved the stock as much as it did, considering there was a $1.6 billion financing in place to fund the operation. Perhaps some cues were taken from that, when it was announced that the bond offering was oversubscribed to the tune of an additional $400 million. From Bloomberg:

Bond investors rewarded Tesla Motors Inc. by snapping up $2 billion of convertible notes at funding costs that are lower than a five-year average as the luxury electric-car maker prepares to build the world's largest battery factory.

In an offering that was bigger than initially estimated, the company sold $800 million of 0.25 percent, five-year notes and $1.2 billion of 1.25 percent, seven-year securities, according to data compiled by Bloomberg. Both coupons are lower than the median for similar deals since 2009. A conversion premium of 42.5 percent more than Tesla's share price before the sale for each portion of debt exceeds the median for comparable transactions.

That shows investors are willing to accept below-market income while waiting for the company's stock to surge after delivering a more than 300 percent gain in 2013. The shares already exceed the 12-month price target among analysts surveyed by Bloomberg. Proceeds from the sale, which Palo Alto, California-based Tesla initially estimated to be at least $1.6 billion, will help co-founder Elon Musk build a plant with potentially more capacity than any other to make lithium-ion batteries.

The reason this note financing was likely oversubscribed is because investors are starting to come to the conclusions that I, and other Tesla bulls, have been screaming from rooftops; this isn't about just producing a couple of nice looking luxury electric cars. Tesla is about a massive paradigm shift in the entire automobile industry. That was the whole point of exploring why the company is well worth its multiple in my article, "Tesla: What Price Multiple Can You Put on True American Innovation?"

Depending on the effects of the Ukrainian conflict with Russia, those who have been waiting for a time to enter Tesla's stock, but have felt like it does nothing but simply go up, may have their chance this coming week.

I wouldn't go right out on Monday and buy it, even if the markets dip; I'd wait for this conflict to play out a bit. I don't think it's going to have any direct effect on Tesla like it will on natural gas (NGAZ) and oil (USO), but stocks with high multiples like Tesla are usually the first to snap back in the midst of a broader market pullback.

I could be re-entering long here (as well as on some other stocks) if we do see a broad market sell off. When and if Tesla starts to pull back, let it happen - embrace it. Count to 20 Mississippi, then buy into Tesla.

Best of luck to all investors.

Source: Count To 20 Mississippi, Then Buy Tesla

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in TSLA over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

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Why You Should Always Be Short

Right off the bat, let me clarify.

I don't mean that you should short only, and I don't mean that you should always technically even be short. What I mean is that it's important to always have a hedge. I do it through holding precious metals and holding individual equities whose fundamentals are out of whack short.

Having roughly 20-40% of my portfolio short with companies that could fail even in the most bullish of the bull markets is important. I'm talking about companies like Sears (SHLD), formerly J.C. Penney (JCP), Angie's List (ANGI), and Pandora (P) - as examples. Those companies don't need help to fail, they've either already done it or are so far overvalued, in the case of Pandora, they're likely to pull back. They don't really have fundamental legs to stand on.

Having said that, let's move this to a macro market discussion and current events. Then, I'll tell you what one has to do with the other.

We've got a quite a little thing brewing with this Ukraine/Russia situation heading into Monday. For those of you who haven't been paying attention, Putin and Russia are adding to the civil unrest in the Ukraine by placing troops in Crimea over the past two days.

Seeking Alpha reported the news early Sunday morning:

• Ukraine has put its troops on high combat alert, appealed to Nato for help and warned of war after Russian President Vladimir Putin received parliamentary approval to invade Ukraine.


• Russia has effectively seized control of Crimea, which was part of Russia until 1954. Russian soldiers - although not identified as such - have surrounded Ukraine military bases in the province and taken over three major airports.


• President Obama and other western leaders have spoken with Putin and warned him against further military intervention, with Obama making economic threats. U.S. legislators have condemned Russia's actions and have called for sanctions, but have stopped short of demanding military action.


• The developments in Ukraine have troubled but not roiled global markets so far, although the country's main stock index and currency have been hit badly. Gas and oil are a particular focus given that Ukraine is a key east-west energy route.

We saw the markets get jittery last Friday when some of this news started to spill into the mainstream:

(click to enlarge)

And it wasn't even until a little after 4pm on Friday that the President came out and addressed the issue, vaguely dancing around the fact that there could be repercussions should Putin continue to try and occupy Ukraine or not allow them to govern themselves.

The President also met with Putin yesterday, as the world looks on and tries to do the diplomatic thing for the benefit of Ukrainians. However, as of 8:45CST this morning, the headlines weren't looking much better:

(click to enlarge - cnn.com)

No doubt, I'm expecting Asia and European markets to get riled up after this news and shed gains as we look forward to what the trading week in the U.S. will turn out to be like. Additionally, you now have commodity items like natural gas and oil that are going to be used as bargaining chips between countries, which could have an adverse effect on the global price of those commodities.

But the title of my article, "Why You Should Always Be Short," I'm sure is being misconstrued by some of you. What I mean is that if you're holding companies fundamentally short at all times (aside from your long positions), you're effectively doing two things:

1. Placing a calculated bet on the fundamentals of a company that it'll go down. If it does, you make money.

2. Buying broad market protection in the case of the macro markets getting spooked - specifically from something like this type of event coming out of nowhere.

Sure, we knew there was civil unrest in Ukraine, but the developments of aggression happened from a Friday night to a Sunday morning; no one has been able to trade the U.S. exchanges in that time, so if you're not already holding something short, you're likely to get clipped in the morning when I'm guessing the futures will dictate an unceremonious opening.

Take this as a learning experience as to why it's always important to have some sort of hedge. Shorting is just as crucial to making a market as buying and holding is, despite what a lot of people say about it. It's a Darwinistic market, and you should be able to bet both sides of the coin on companies.

Having said that, no one likes global unrest of any type. Here's hoping this situation gets cleared up, and best of luck to you and your investments in the coming week.

How You Can Trade Volatility:

• Go long volatility ETFs, like (VXX)


• Buy ETPs that track the VIX, like (UVXY) and (CVOL)


• Buy VIX call options


• Buy call options for (VXV)


• Buy S&P VIX Mid-Term Futures (VXZ)


• Buy S&P 500 VIX ETF listed as (VIXS)

Other ETFs for Monday

• S&P Emerging Europe (GUR)


• iShares Emerging Markets Eastern Europe (ESR)


• U.S. Oil ETF (USO)


• iShares VIX Short-Term Futures ETN


• iPath S&P Crude Oil ETN (OIL)


• ProShares Crude Oil ETN (UCO)


• Velocity 3x Inverse Natural Gas (DGAZ)

Source: Why You Should Always Be Short

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

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Apple A7 And Intel: Does 64-Bit Make A Difference?

One of the chief criticisms that I received for my recent article, "Apple Outguns Intel" was that I was showing Geekbench results for the Apple (AAPL) A7 running on 64-bit iOS while only showing 32-bit Android results for Intel's (INTC) recently announced Atom Z3480 platform. There was a reason that I did this, and it was actually - believe it or not - to provide a more apples-to-apples comparison between the Intel chip and the Apple chip in that particular benchmark.

You'll see below that "64-bit" doesn't actually do much (if anything) for the Intel Silvermont core (Z3480 packs two of them) in that benchmark but it actually makes a pretty big difference for the ARMv8 based "Cyclone" core inside the Apple A7 because the ARMv8 instruction set adds support for cryptography instructions (AES-NI, in particular) that aren't available on the 32-bit ARMv7 chips (or in ARMv8, 32-bit mode).

Let me illustrate what I mean.

Apple A7: ARMv7 (32-bit) vs. ARMv8 (64-bit)

Since the ARMv8 instruction set adds a number of important features and, in particular, dedicated cryptography instructions, the performance delta between the A7 in 32-bit mode and 64-bit mode in Geekbench 3 is actually pretty staggering:

(click to enlarge)

all images from Primate Labs website

Breaking it down by the benchmark's 3 sections (Integer, Floating Point, and Memory), you can see where the improvements are coming from:

(click to enlarge)

In the Integer results, we get a huge speedup in AES and SHA1 (both cryptography algorithms) due to the fact that ARMv8 implements these in hardware (and Apple seems to have done a good job implementing them). The rest of the benchmarks see mild improvements (or in the Dijkstra case, a slight regression).

Let's take a look at floating point:

(click to enlarge)

You can see that the improvements (2x the 128-bit SIMD registers) are much more broad based and in aggregate lead to a pretty significant improvement in the total score.

Finally, the memory results:

(click to enlarge)

The difference here is largely due to the improved Stream Copy with the rest of the tests identical.

The point remains, though, that because Apple implemented ARMv8 (and in particular, AArch64), it was able to gain a pretty sizable speedup thanks to the much more powerful instruction set. It's also worth noting that the CPU core itself is much improved, even in 32-bit mode over the "Swift" core inside of the Apple A6.

Intel 32-Bit vs. Intel 64-Bit

With the release of the first 64-bit enabled Atom tablet (the HP ElitePad 1000 G2), we now have some legitimate 64-bit Windows 8.1 results for a new chip known as the Atom Z3795. I will show you in a moment that the "32-bit" versus "64-bit" question really doesn't matter at all for the Intel chips (particularly as Intel's chips can make use of those dedicated cryptography instructions):

(click to enlarge)

Indeed, there is quite literally no difference between the 32-bit and 64-bit versions of Geekbench for Intel "Silvermont" based SoCs. This why I did not bother to show 64-bit results for Intel in the prior article.

Intel: GCC vs. ICC

One thing that does make a difference above all else is what compiler is used to generate the Geekbench program (i.e. the translation from source code to a program that users can run). The difference between Microsoft's compiler/GCC and Intel's own compiler is pretty staggering. Let's go through it by benchmark section:

Integer:

(click to enlarge)

When the benchmark is compiled with Intel's own compiler, the integer subtest sees a pretty nice speedup across all of its constituent tests. The overall score per-core sees a modest improvement.

Floating Point:

(click to enlarge)

The difference here is staggering. Intel's chip sees a 29% speedup overall with one test seeing about a 3x improvement! Here's what Mr. John Poole, lead programmer/author of Geekbench, had to say:

We haven't done a lot of work with ICC, but we've found that ICC builds running on Silvermont are faster, with a 5% increase in integer performance and a 29% increase in floating point performance.

Most of the floating point increase comes from the Sharpen Filter workload which ICC is able to vectorize. Also, the MKL library, which ICC uses in place of the standard math library, helps improve the performance of the BlackScholes, N-Body, and Ray Trace workload

In short, the advantages that the Apple A7 (thanks to ARMv8) enjoys are exposed when the program is compiled with Intel's compiler but for whatever reason not with Microsoft's compiler or GCC. With that in mind, the A7 is still faster per core in Integer/Floating Point workloads by a non-trivial amount (although it probably draws more power at peak load), but Silvermont does look at lot better when Geekbench 3 is compiled with Intel's compiler than it does with GCC/MSVC++ for what appear to be legitimate reasons/optimizations and NOT by "cheating" (again, Geekbench 3's developer explains it nicely).

However, it is puzzling that Intel has not been more aggressive in making sure all of the popular benchmarks are compiled with ICC, particularly as these benchmarks do influence buyers and OEMs alike. The difference here is staggering.

Conclusion

I still stand by my previous article. Merrifield is slower than A7 and Moorefield with four cores is likely to be faster although it will be facing the Apple A8 and not the A7. With that in mind, I think that what really happened here is that Intel under-designed Silvermont by targeting a 1 watt/core power envelope while the Apple engineers were much more aggressive. In a mobile device, the screen is by far the biggest drain of power, and an extra 0.5W - 1W per core at peak performance would have been enough on Intel's 22nm process to match the power envelopes of its competition but dramatically outperform them.

The irony here is not lost on me. Intel built the industry's most power-efficient mobile CPU core, but ended up with a core too frugal on power and not aggressive enough on raw CPU performance.

Source: Apple A7 And Intel: Does 64-Bit Make A Difference?

Disclosure: I am long INTC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

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Seadrill: A 10% High-Yield Alternative To REITs And MLPs

Seadrill (SDRL) is an offshore deepwater drilling company that, I think, still makes a great value proposition for investors seeking high dividends as well as exposure to the drilling industry. The company posts consistently high economic utilization rates and operates one of the largest fleets of drillships, Jack-ups, semi-submersibles and tender rigs.

Over the last year, shares of Seadrill have been effectively flat with a return of minus 0.11%. Year-to-date Seadrill has lost 7.76% and the stock is down 23.14% since its 52-week High of $48.09. Transocean (RIG), another leading offshore drilling company, lost even more with a trailing twelve month return of minus 18.70%. Shares of competitor Diamond Offshore Drilling (DO) literally collapsed during 2013 as worries about the growth of the offshore drilling market started to capture investors: Diamond Offshore Drilling lost 31.77% over the course of last year and had one of the worst performances in the sector. The stock is also down 15.72% year-to-date and 35.37% from its 52-week High of $73.19. Noble (NE) and Ensco (ESV) delivered negative one-year returns of 12.21% and 11.81% respectively. The following graph depicts the one-year performance charts of offshore drilling companies:

(Source: Yahoo Finance)

Background

Despite cutbacks in exploration spending and a cautious growth outlook for the offshore drilling market, I think the long-term fundamentals of the offshore business actually support an investment in Seadrill. Large offshore oil- and gas discoveries have not only become rare, it is also increasingly difficult to exploit newly discovered reservoirs. Exploration companies now need to dig deeper and have to go farther offshore to find new oil- and gas reservoirs that are worth the cost and the effort. Drilling companies like Seadrill will benefit from long-term fossil fuel demand and increased drilling activity to bring new supplies to market.

Seadrill actually has performed quite well over the last three years - its quarterly EBITDA has consistently been above $573 million. Most recently, Seadrill reported the largest sequential increase in EBITDA in three years. Its fourth quarter EBITDA came in at $768 million: A 15.8% increase from the $663 million in EBITDA reported for the third quarter 2013.

(Source: Seadrill Conference Call 4Q 2013 Presentation)

Seadrill's distribution history is quite impressive, too. The offshore driller has just increased its quarterly distribution by $0.03 to $0.98. Since the fourth quarter 2010 Seadrill has held its dividend payment at least steady and has increased its recurring dividend (not accounting for special distributions) ten times during the same time period.

(Source: Seadrill Conference Call 4Q 2013 Presentation)

High dividend yields and low entry multiples

Seadrill currently trades at the largest forward earnings multiple compared to other firms in the offshore drilling sector: 10.43. Transocean trades at only 8.35x earnings while Noble is the cheapest company in the peer group with a forward P/E ratio of 6.78 (which is equivalent to a whopping earnings yield of 14.7%).

(Source: Achilles Research, Finviz.com)

The decline in equity valuations also led to an increase in yields that investors can enjoy -- considering, of course, no material changes are made to the distribution policies of such companies. Seadrill presently pays investors $0.98 quarterly which translates into a distribution yield of 10.61% -- by far the highest yield in the sector. With that high a yield, Seadrill might also be an interesting alternative for income-hungry MLP investors who usually pursue high-yield investments such as Kinder Morgan Energy Partners (KMP) or BreitBurn Energy Partners (BBEP).

(Source: Achilles Research, Finviz.com)

With a P/E ratio of 10.43 Seadrill is the most expensive company in the peer group, but also offers investors the largest dividend yield of 10.61%. Seadrill currently trades at a 92.91% premium to the peer group average dividend yield of 5.50%.

(Source: Achilles Research, Finviz.com)

Conclusion

I still think that Seadrill is an interesting alternative to other high-yield investments in the oil- and gas midstream business as well as the real estate investment trust sector. While the company itself is cautious with respect to future growth in the offshore drilling market, it is also noteworthy that the company has one of the most modern fleets in operation and also posts consistently high utilization rates (Seadrill's fourth quarter 2013 ultra-deepwater economic utilization rate stood at 94%).

I also believe oil- and gas majors will ramp up spending on new exploration projects as they face ongoing pressure to add to their reserves and have a strong interest in developing conventional and unconventional projects both onshore and offshore. Long-term BUY on Seadrill's historical EBITDA performance, high utilization rates, fleet standard, a low earnings valuation and a double-digit dividend yield.

Source: Seadrill: A 10% High-Yield Alternative To REITs And MLPs

Disclosure: I am long KMP, BBEP, SDRL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

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