COMPANIES

• Whitney Tilson: AIG Seriously Undervalued by Lee Brodie, CNBC - AIG is trading at a 41% discount to tangible book value today… And although the government plans to sell out of its stake, Tilson doesn’t think the overhang will depress the stock significantly.
• AIG: It’s Complex, But Buyable at $30-$31 by CNBC
• How Bruce Berkowitz stumbled with AIG by CNNMoney - Since AIG posted $100 billion in net operating losses over the past few years, it won’t have to pay taxes on its next $100 billion in profits.

TECHNOLOGY

• Nancy Miller on the Facebook IPO: Part One by Abnormal Returns - The drop in Facebook’s first quarter earnings, both year-over-year and sequentially was jarring. Everyone knew that Facebook was spending like crazy, expanding its data centers and hiring (including stealing like mad from Google).
• Nancy Miller on the Facebook IPO: Part Two by Abnormal Returns - Facebook and Google might be has-beens in the next five years or essentially because they don’t have the right kind of DNA. Jackson put in terms of an ecosystem. Web 1.0 was one system. Web 2.0 antoher. Now Mobile is yet another. This is a way of saying their big growth is over.
• Nancy Miller on the Facebook IPO: Part Three by Abnormal Returns - Back in 1980 Apple was priced at $14 and ended its first day at $29. And then the stock did virtually nothing for decades. There are tons of studies that show that buying on the first day of trading is usually a losing proposition.

ECONOMY

• The Market’s Best Indicator Continues To Work Perfectly by Joe Weisenthal, Business Insider - For over 5 years, they’ve moved in virtual lockstep, and they’re doing it again. Lately the improvement on initial jobless claims has stalled out, and the rally in the S&P 500 has stalled out. It alone is a good reason to think that fundamentals, not central banks, are what’s driving this market.

INVESTING

• Why the Smart Money Looks Dumb by Steven M. Sears, Barron’s - Because the eyes of the sophisticates are fixated on Europe’s economic problems, and their minds are searching for data to dispel evidence of a U.S. recovery, many of the funds and accounts they run are trailing their performance benchmarks.

INVESTING

• Prepare Yourself: Be Aware Of Short Ratios, Seeking Alpha - aware of stocks with the highest short ratios because those are where the greatest short squeezes often occur.

TECHNOLOGY

• 5 Ways to Guarantee Your Idea Won’t Be the Next Instagram - The alternative title to this post could have been “Ideas Without Execution Are Crap.”

ECONOMY

• Shiller: Past high stock returns an ‘anomaly’ by Penelope Wang, CNN Money - If you plug in today’s P/E of about 22, it would be predicting something like an annualized 4% return after inflation. Not so bad when you look at the 20-year Treasury bond yield of 2.8% and the likely capital losses if interest rates go up.

INVESTING

• Alpha Hunter Lauren Templeton on Generating Alpha from Value Investing by vshah, AllAboutAlpha - The point of maximum pessimism is the ultimate time to buy a stock because at this point, all the sellers are gone… and only buyers remain. How do you determine this point? Even Uncle John said it’s impossible…. You never know until it has passed!
• The Earnings Preannouncement Rebound Rally by E.S. Browning, Wall Street Journal - Preannouncements turned more negative and stocks did rebound as expected once earnings reports started to hit. If that trend continues, Strategas is telling clients, “equities could perform well in the near term.”
• VIX on Pace for Record Eighth Straight Gain; Time to Fret? by Steven Russolillo, MarketBeat - Far from signaling a return to high-volatility conditions, by two weeks later the VIX was lower every time…Because there is such a strong inverse relationship between volatility and stock prices, the declining volatility over the next two weeks usually resulted in rising stock prices. The S&P 500 was higher two weeks later eight of the nine times, and performed well beyond random returns across all time frames up to three months later.”

• The Apple Conundrum: When To Sell? - Apple conundrum of ‘when to sell’ could potentially come down to the exact same reason many investors bought in the first place: innovation.
• Apple: Know when to hold ‘em, know when to fold ‘em.. - I valued Apple at $710/share still holds. The only difference is that Apple, which was under valued by about 23% when I looked at it a few weeks ago (at $545/share) looks a little less under valued today (about 13% at $620/share).
• The Future of Mobile [Slide Deck] by Alex Cocotas and Henry Blodget, Business Insider

INVESTING

• Guru Grades, CXO Advisory Group - overall assessment of the stock market forecasting ability of experts in aggregate is far more reliable, based on sample size and duration, than the evaluations of individuals.
• Warren Buffett on Investing, CXO Advisory Group - assets that will never produce anything, but that are purchased in the buyer’s hope that someone else – who also knows that the assets will be forever unproductive – will pay more for them in the future. …The major asset in this category is gold
• Ken Fisher on Market Analysis, CXO Advisory Group - the only basis for making a bet is believing somehow, some way, that I know something other people do not know. If I make bets based on things others widely believe, I will end up being wrong/unlucky as often as I am right/lucky, with transaction costs leaving me worse off than if I made no bets at all.

TECHNOLOGY

• Why “Don’t Be Evil” Is Evil, and Why Google Isn’t So Bad, Pando Daily - might be right that Google has violated its own definition of evil, but doesn’t it matter that every one of its rivals also routinely violates Google’s definition of evil? Wouldn’t that suggest that it’s the definition of “evil” that needs updating, rather than Google’s own behavior, which seems perfectly in line with that of its rivals?
• The Case Against Google, Gizmodo - people are increasingly using non Web-based avenues to access the Internet, and Google would be remiss to not make a play for that business. The problem is that in branching out, Google has also abandoned its core principles and values.

TECHNOLOGY

• 7 Alternatives to Play Apple Beyond AAPL by Jeff Reeves, Market Watch - In early June, data-storage company Fusion-io FIO -1.16% pulled off a highly successful IPO . The company priced its deal at $19, which was above its $16-$18 range. … But a big reason for the appeal of FIO is its chief scientist: Steve Wozniak, the co-founder of Apple.

The legendary stock investor Peter Lynch ran Fidelity’s Magellan Fund from 1977 to 1990, beating the S&P 500 in all but two of those years. He averaged annual returns of 29%. That’s a mind-blowing figure. It means that $1 grew to more than $27; if you invested as little as $37,000 with him in 1977, you were a millionaire in 1990. Below is an excerpt from his book One up on Wall Street:

If it’s a choice between owning a stock in a fine company with excellent management in a highly competitive and complex industry, or a humdrum company with mediocre management in a simpleminded industry with no competition, I’d take the latter.

“Any idiot can run this business” is one characteristics of the perfect company, the kind of stock I dream about. … the most important thirteen of which are of follows.

1. It sounds dull - or, even better, ridiculous. The perfect stock would be attached to the perfect company, and the perfect company has to be engaged in a perfectly simple business, and the perfectly simple business ought to have a perfectly boring name. The more boring it is, the better. Automatic Data Processing is a good start.
2. It does something dull. I get even more excited when a company with a boring name also does something boring. Crown, Cork, and Seal makes cans and bottle caps. What could be duller than that? You won’t see an interview with the CEO of Crown, Cork, and Seal in Time magazine alongside an interview with Lee Iacoca, but that’s a plus. … If a company with terrific earnings and a strong balance sheet also does dull things, it gives you a lot of time to purchase the stock at a discount. Then when it becomes trendy and overpriced, you can sell your shares to the trend-followers.
3. It does something disagreeable. Better than boring alone is a stock that’s boring and disgusting at the same time. … Take Safety-Kleen. … goes around to all gas stations and provides them with a machine that washes greasy auto parts. This saves auto mechanics the time and trouble of scrubbing the parts by hand in a pail of gasoline, and gas stations gladly pay for the service.
4. It’s a spinoff. … such as Safety-Kleen out of Chicago Rawhide or Toys “R” Us out of Interstate Department Stores - often result in astoundingly lucrative investments.
5. The institutions don’t own it, and the analysts don’t follow it.
6. The rumors abound: It’s involved with toxic waste and/or the mafia.
7. There’s something depressing about it. Now if there’s anything Wall Street would rather ignore besides toxic wastes, it’s mortality. And, SCU does burials. … The best thing about this company is that it was shunned by most professional investors for years. Despite an incredible record, the SCI executives had to go out on cavalcades to beg people to listen to their story.
8. It’s a no-growth industry. There’s nothing thrilling about a thrilling high-growth industry, except watching the stocks go down. Carpets in the 1950s, electronics in the 1960s, computers in the 1980s, were all exciting high-growth industries, in which numerous major and minor companies unerringly failed to prosper for long. That’s because for every single product in a hot industry, there are a thousand MIT graduates trying to figure out how to make it cheaper in Taiwan. … SCI was helped by the fact that there’s almost no growth in the funeral industry. Growth in the burial business in this country limps along at one percent a year, too slow for the action-seekers who’ve gone into computers. But it’s a steady business with as reliable a customer base as you could ever find.
9. It’s got a niche. I’d much rather own a local rock pit than own Twentieth Century-Fox, because a movie company competes with other movie companies, and the rock pit has a niche. … you’ve got the only gravel pit in Brooklyn, you’ve got a virtual monopoly, plus the added protection of the unpopularity of rock pits. … What makes a rock pit valuable is that nobody else can compete with it. The nearest rival owner from two towns isn’t going to haul his rocks into your territory because the trucking bills would eat up all his profit.
10. People have to keep buying it. I’d rather invest in a company that makes drugs, soft drinks, razor blades, or cigarettes than in a company that makes toys. In the toy industry somebody can make a wonderful doll that every child has to have, but every child gets only one each. Eight months later that product is taken off the shelves to make room for the newest doll the children have to have - manufactured by somebody else.
11. It’s a user of technology. Instead of investing in computer companies that struggle to survive in an endless price war, why not invest in a company that benefits from the price war - such as Automatic Data Processing?
12. The insiders are buyers.
13. The company is buying back shares.

RELATED LINKS

• How Peter Lynch Destroyed the Market
• 5 investing gems from Peter Lynch
• Peter Lynch Investing Screen: Searching for Undiscovered Growth Stories

INVESTING

• Shiller: Economist who foresaw bubbles still likes stocks by Derek Kravitz, Associated Press - They’re highly priced, and they’re risky, but they’ve had a good historic record. And last time I looked, inflation index bonds have a negative real yield.
• Stocks Cheaper Than Any U.S. Peak in 23 Years by Bloomberg - Companies in the benchmark gauge of U.S. stocks trade for 14.1 times earnings after advancing 102 percent since March 2009 to an almost four-year high last week

TECHNOLOGY

• Apple’s massive ‘iPad 3’ air freight deal with DHL shaking up shipping rates by AppleInsider - shipping rates rose as much as 20 percent in one week as Apple has taken up available capacity at “premium rates.”
• Big Investors Selling Apple Ahead of Wednesday Event by CNBC - a big investor put a chunk of stock up for sale, others saw the trade and they too sold out of their position. Although we’ll never know why for certain - the Fast pro has a theory. Apple is holding an event on Wednesday and historically Apple shares run ahead of a new gadget launch and then sell-off, explains Najarian.