Facebook bought Instagram for $1B in stock (now $715M) in a costly move for a property with no revenue. The bull case: Analysts thinks the mobile app can generate between $500M to $700M over the next three years to pay for the deal quite neatly. The bear case: Instagram is a fad for 14-year old girls lacking significant purchasing power. Just watch this video and see if a cool billion seems right:
Sources: CNET.com, CollegeHumor.com, Bloomberg
The potential entry of McDonald’s into the bagged coffee game throws an unexpected wildcard into the mix with the space already crowded by the likes of Green Mountain Coffee Roasters, Starbucks, Kraft Foods Group, and Dunkin’ Brands to name a few. Though the competition is heated, there could be enough cups of Joe to go around as even a tiny sliver of the huge market can lead to significant profits for any of the major players. Coffee market breakdown: The $10B industry percolates at a 5% growth clip per year with a profit margin close to 30%.
via Seeking Alpha and Wall Street Journal
UPDATE: Though McDonald’s calls the chatter “speculative,” the smart money says Mickey D’s will take a crack.
Random number generation? A striking report from S&P tips off that not only did 84% of actively managed funds fail to beat their benchmarks in 2011’s tricky market, but less than 50% of portfolio managers outperformed even over a five year tracking period. Even the best of the lot struggle, with only 12.2% of the large-cap funds ranked in the top quartile five years ago managing to maintain a spot in the upper 25% five years later. “There’s no evidence of persistence of performance beyond what would be randomly expected,” says Buckingham Asset’s Larry Swedroe.
via Barron’s and Seeking Alpha
A quick peek at the widening yield spread between a basket of diversified high-yielding multinational stocks and the best savings account rates:
Dividend Stock Portfolio (4.04% yield)
Southern Copper (SCCO) 6.98%
Eli Lilly (LLY) 4.96%
Total (TOT) 4.90%
Merck (MRK) 4.48%
Kimberly-Clark (KMB) 4.14%
Waste Management (WM) 4.03%
Vodafone (VOD) 3.80%
Intel (INTC) 3.37%
Chevron (CVX) 3.12%
Coca-Cola (KO) 2.94%
McDonald’s (MCD) 2.90%
Microsoft (MSFT) 2.75%
Source: Seekingalpha.com
Savings Portfolio (1.27% yield)
Savings Account 1.01%
Money Market Account 0.90%
1-year CD 1.15%
2-year CD 1.25%
3-year CD 1.48%
5-year CD 1.85%
Source: MoneyRates.com, RateBrain.com, SavingsAccounts.com, Interest.com
Where to park cash today? That is the question for many savers. It’s a pretty tough choice, when interest rates are barely high enough to cover the increase in the cost of living. Keeping all your money in one bank or one product doesn’t provide
Clark Schultz Blog 