amazon.com Inc.
NASDAQ symbol AMZN, is the leading bookseller on the Internet, as well as a leading video and music seller. It also has numerous other store categories, including electronics, computer games, toys and tools. Through Amazon Services, the company also offers programs that let sellers market on its web sites.
INDIGO BOOKS & MUSIC INC. $12 (Toronto symbol IDG; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 24.5 million; Market cap: $294 million; Price-to-sales ratio: 0.3; SI Rating: Average) is Canada’s largest bookseller. Indigo operates 91 superstores under the Indigo, Chapters and World’s Biggest Bookstore brands. It also sells books online, and in smaller stores under the Coles, Indigo, Indigospirit, SmithBooks and The Book Company banners. In February, Indigo launched a new web site called shortcovers.com, which lets users download electronic books and magazines to their computers and mobile devices. Although e-books are still evolving, U.S.-based bookseller Amazon.com’s Kindle reader and devices from other companies, such as Sony, have spurred interest in them. As well, shortcovers will help Indigo compete if Amazon decides to bring the Kindle to Canada. Indigo’s losses in its first quarter, which ended June 27, 2009 rose to $0.09 a share from $0.05 a year earlier. That’s mainly because of the cost of launching shortcovers.com. As well, Indigo earns most of its money during the Christmas season, which falls in its third quarter. It typically earns little, or even posts losses, in the other quarters....
MCGRAW-HILL COMPANIES LTD. $32 (New York symbol MHP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 314.8 million; Market cap: $10.1 billion; Price-to-sales ratio: 1.6; WSSF Rating: Average) will make over 100 of its college textbooks available to users of the Kindle and Kindle DX electronic-book readers sold by online bookseller Amazon.com. That’s on top of the over 3,000 McGraw-Hill business, medical and technical titles that Amazon now sells through its Kindle store. This could become a significant market for McGraw-Hill. Students will probably prefer to carry a Kindle, which can hold the contents of hundreds of textbooks, instead of regular books. As well, e-books are cheaper to publish than textbooks. This would increase McGraw-Hill’s profit margins. McGraw-Hill is a buy.
Japan is heading into an election on August 30. Polls show the Democratic Party of Japan stands a good chance of defeating Prime Minister Taro Aso’s Liberal Democratic Party in the Japanese parliament’s lower house.
To spur economic activity, the Democratic Party of Japan plans to push for more aggressive stimulus spending, such as allowances for families with children, free public high-school education and cuts to the gasoline tax.
Under Prime Minister Aso, Japan’s government is spending 25 trillion yen ($284.6 billion Canadian) to help the economy grow. As in many other developed countries, this is taking the form of infrastructure spending, direct handouts to consumers and incentives for environmentally friendly products.
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To spur economic activity, the Democratic Party of Japan plans to push for more aggressive stimulus spending, such as allowances for families with children, free public high-school education and cuts to the gasoline tax.
Stimulus spending drives rebound
Government stimulus spending has already played a big role in the country’s recent turnaround. In the latest quarter, ended June 30, 2009, Japan’s economy posted an annualized growth rate of 3.7%. The turnaround comes after four quarters of steep contraction, and is one reason why investors are wondering if Japan is now a good place for offshore investing.Under Prime Minister Aso, Japan’s government is spending 25 trillion yen ($284.6 billion Canadian) to help the economy grow. As in many other developed countries, this is taking the form of infrastructure spending, direct handouts to consumers and incentives for environmentally friendly products.
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AMAZON.COM $83 (Nasdaq symbol AMZN; SI Rating: Extra Risk) (206-266-1000; www.amazon.com; Shares outstanding: 431.8 million; Market cap: $35.8 billion) plans to buy privately held Zappos.com for $807 million in common stock. Zappos is an online seller of shoes, clothing and accessories. Zappos posted roughly $1 billion in sales last year (Amazon.com had $19.2 billion). Zappos was launched in 1999, and was one of the first companies to succeed in selling footwear on the Internet. It stocks a range of styles, and lets customers order and return multiple pairs without paying extra shipping. Zappos’s management will remain in place, and the company will still be headquartered in Las Vegas....
PEPSICO INC., $57.74, New York symbol PEP, increased its offer to buy its two main bottlers: Pepsi Bottling Group Inc. (New York symbol PBG) and PepsiAmericas, Inc. (New York symbol PAS). Both have now accepted PepsiCo’s offer, which is worth $7.8 billion. To put this in context, PepsiCo earned $1.7 billion, or $1.06 a share, in the second quarter of 2009. PepsiCo already owns 33% of Pepsi Bottling Group and 43% of PepsiAmericas. The company first offered to buy these bottlers last April for a total of $6 billion in cash and shares, but they rejected this amount as insufficient. In response, PepsiCo launched the new bid, which is a 30% increase over its first offer. The deal should close later this year, or in early 2010, and will give PepsiCo control over 80% of its North American beverage volumes. By consolidating plants and administrative functions, the company feels it can lower its annual costs by $300 million by 2012. That should add $0.15 a share to its annual earnings. Owning these bottlers will also make it easier for PepsiCo to launch new products, and react more quickly to changing consumer tastes in different regions....
GANNETT CO. INC. $6.26 (New York symbol GCI; Conservative Growth Portfolio, Consumer sector: Shares outstanding: 232.4 million; Market cap: $1.5 billion; Price-to-sales ratio: 0.2: WSSF Rating: Average) will start selling an online edition of USA Today, its flagship newspaper, in August. The company already sells an electronic version of USA Today through Amazon.com’s Kindle e-book reader service. Online newspapers face strong competition from free Internet news sources. But USA Today aims to use exclusive content to attract online subscribers. As well, unlike the print version, the online edition will publish a weekend edition. Moreover, online publishing is cheaper than printing and delivering newspapers, so Gannett needs fewer subscribers to earn a profit on this project. Gannett is a buy.
INTUITIVE SURGICAL, $222.53, symbol ISRG on Nasdaq, jumped almost 31% this week after it reported improved results in the latest quarter. Intuitive makes the “da Vinci,” a computerized surgical system. Guided by a miniature camera connected to a 3-D monitor, surgeons use the da Vinci to operate by remotely manipulating tiny robotic arms. This is safer and far less invasive than regular surgical techniques, and helps cut a patient’s recovery time and post-operative discomfort. It also reduces scarring and infection risk. The da Vinci system is used in heart surgeries, prostatectomies and hysterectomies, among other procedures. In the three months ended June 30, 2009, Intuitive’s revenue rose 18.9%, to $260.6 million from $219.2 million a year earlier. Earnings climbed 21.9%, to $62.4 million, or $1.65 a share, from $51.2 million, or $1.32 a share. These results beat analysts’ expectations of $1.25 a share in profits on revenue of $230 million....
AMAZON.COM INC., $77.63, symbol AMZN on Nasdaq, has cut the price of its Kindle 2 e-book reader by $60 U.S. The unit now sells for $299 U.S. (The Kindle is only available in the United States.) The company’s larger Kindle DX, which it plans to start shipping later this summer, is still $489 U.S. Kindle users can download files from Amazon’s Kindle store, which contains over 300,000 books. Most bestsellers and new releases are just $9.99 U.S. each. Users can also download leading U.S. and international magazines and newspapers, as well as over 1,200 blogs. Because of strong demand for the Kindle, Amazon has been able to negotiate better prices from manufacturers. The price cut should spur more sales and downloads....
AMAZON.COM $77.97 (Nasdaq symbol AMZN; SI Rating: Extra Risk) (206-266-1000; www.amazon.com; Shares outstanding: 428.9 million; Market cap: $33.5 billion) recently unveiled the Kindle DX, a new version of its Kindle 2 electronic reader. The Kindle DX has a 9.7-inch display. That’s about 2.5 times bigger than the Kindle 2’s screen, and makes it easier to read pages that are more detailed than those found in most books. These include newspapers, magazines, textbooks and business documents. As well, the Kindle DX’s memory will hold up to 3,500 books. That’s more than double the Kindle 2’s capacity. Amazon.com is still a buy.
MASTERS ENERGY, symbol MSY on Toronto, has officially been taken over by ZARGON ENERGY TRUST, $15.95, symbol ZAR.UN on Toronto. Zargon was able to get a majority of Masters’ shareholders to vote in favour of its cash-and-unit offer at a meeting last week. Masters shareholders will get $0.37 a share in cash, plus 0.0957 of a Zargon unit. (The unit portion is based on the 1.475 million new units Zargon is issuing as part of the offer.) At Zargon’s current price, that’s worth a total of $1.90 per Masters share, a gain of over 64% from before the offer. In all, buying Masters will cost Zargon $41.4 million. Masters will add 1,275 barrels of oil equivalent per day to Zargon’s production. Zargon now expects its production to average 10,200 barrels per day this year....