Why You should Buy Rational Patent

Rational Patent (NASDAQ: RPXC) is a fast growing company in a niche industry: patent defense. Companies such as Google  (NASDAQ: GOOG), Samsung, Cisco, Sony, Nokia, and Verizon have all turned to RPX for patent management solutions. According to RPX’s prospectus:

“The core of our solution is defensive patent aggregation, in which we acquire patent assets that are being or may be asserted against our current and prospective clients.  We then license these assets to our clients to protect them from potential patent infringement assertions” (62, Prospectus).

In simple terms, there has been an arms race for patents over the past decade.  For example, Google recently bought Motorola for $12.5 billion in order to acquire its 14,600 patents and 6,700 potential patents.  Google believes that these patents from Motorola will help Google continue its success in the Android phone market.  Unfortunately for Google (but fortunately for RPX), managing a portfolio of patents is a time-consuming and complicated business.  Instead of wasting internal resources on patent defense, Google has wisely chosen to hire RPX.  To refer to the excerpt above, RPX continuously monitors the patent market and acquires patents that it feels will protect its clients.

RPX is the top-dog in this new market and does not face significant competition from other companies in the Patent Defense industry.  According to its prospectus, RPX listed its main competitors as internal patent risk management departments within companies.  For example, RPX competed with Google’s internal patent defense department to acquire Google's patent management business.  I believe that the need for patent management solutions will become so great that companies will move away from managing patents internally and outsource business to companies such as RPX.

Quantitative Analysis

Below I have provided a table from Fidelity.com highlighting RPX’s growth.

Key figures for me include revenue, earnings, and capital spending growth.  In RPX’s case, these numbers are all extremely good.  Revenue has increased 88% compared to last year, earnings have increased 96%, and RPX has continuously re-invested in itself through its 82% capital spending growth over the last five years.  It’s important to note that RPX spends its money on acquiring more and more patents on behalf of its clients.

Perhaps even more important is RPX’s high level of profitability. I have provided another table from Fidelity.com for your reference.

With a gross margin of over 70% and operating margin over 32%, it is safe to say that RPX is highly profitable.  My favorite one-two punch is growth and profitability.  Whenever a company is able to grow at a fast pace and maintain profits, it usually results in great return on investment for shareholders.  RPX’s share-price has been increasing as of late, and actually shot up 12% today on an announcement that Alcatel-Lucent will liscense its portfolio of over 29,000 patents to RPX.  According to Reuters.com, Alcatel-Lucent is basically allowing RPX to sell its patents to various companies such as Google and Intel.  Proceeds from the patent sales are estimated at $1 billion dollars.  Much of this money will of course go to Alcatel-Lucent, but RPX will surely charge a middle-man fee.  In addition, RPX will use this as an opportunity to protect its own clients such as Google and Nokia.  In other words, if RPX feels that Google could benefit from Alcatel-Lucent's patents, it will purchase these patents on behalf of Google.  RPX is starting to develop a strong network of clients in the patent industry that will serve as a barrier to entry for other companies trying to compete with RPX.  It appears that now is the perfect time to jump in and invest in RPX; it has all the signs of a winner.

Michael R. Caligiuri does not own a position in Rational Patent and will not initiate a position within the next 48 hours.

Zipcar Ready to Take Off

Former Caligiuri Investments Stock

Back on April 14th, 2011 I blogged about Zipcar after its IPO.  Clickhere to see the original write-up.  A couple predictions I made for Zipcar were:

1.  "Because Zipcar is a relatively young company, it has yet to turn a profit.  This will no doubt be a concern for many investors, however I believe that Zipcar will be profitable in the long-term."

2.  "If I had to guess, Zipcar will receive immense interest from outside companies such as Ford and Toyota."

3.  "In the end, I believe that this will be at least a multi-billion dollar company."

Prediction Number 1 = Correct


"I believe that Zipcar will be profitable in the long-term."

Zipcar has indeed finally turned a profit.  Turning a profit is kind of important (joke), so this is huge.  On November 2nd, 2011 Zipcar released its earnings report showing its profitability.  Scott Griffith, Chairman and CEO of Zipcar, said, "We are delighted to report a strong quarter of growth and profitability."  Click here for the article.

Despite the profit hurdle finally being passed, we should not be surprised if Zipcar fails to report profits for certain quarters in the short run.  Like all great companies that have come before it, Zipcar is aggressively spending money to grow its business.  Now that we have seen Zipcar turn a profit, we should have more confidence in the long-term plan of the company.

Prediction Number 2 = Correct


"If I had to guess, Zipcar will receive immense interest from outside companies such as Ford and Toyota."

Zipcar and Ford struck a deal.  Below is a brief excerpt from the New York Times describing the deal.  For the complete article, click here.

"[Ford] will supply its vehicles to Zipcar locations on 250 college and university campuses in the United States.  The two-year program will provide Zipcar with up to 1,000 Ford Focus sedans and Escape sport utility vehicles."

This was not only a sweet deal because Zipcar received a bunch of free cars, but it also shows that Ford recognized Zipcar as the market leader.  In other words, Ford could have chosen to provide Hertz with free cars (a competitor to Zipcar in the car sharing industry), but it chose Zipcar.  CEO Scott Griffith said it best:

"Having Bill Ford and the Ford Motor Company validating Zipcar as a business model and as an emerging transportation brand is a big step for us."

Prediction 3 = Hopefully Correct!


"In the end, I believe that this will be at least a multi-billion dollar company."

The third prediction I made was that Zipcar would be at least a multi-billion dollar company, I.E. a multi-billion dollar market capitalization.  Right now, Zipcar's market capitalization is $724 million, so a multi-billion dollar market cap would mean triple digit returns for investors.

Now is the Time to Buy

I've been following Zipcar since April and think that now is a great time to buy into what I believe to be a future multi-billion dollar company.  Remember, own at least 15-25 companies in a portfolio and don't allocate too much to any one stock.  

Michael R Caligiuri owns shares in Zipcar

GMCR Drops 30%

Earnings and Revenue Lower than Expected

GMCR released a statement confirming that it missed earnings and revenue expectations this quarter.  More specifically, GMCR missed the forecasted EPS by 1 penny.  In addition, they reported a revenue stream of $712 million instead of the expected $761 million.  Despite the fact that these missed expectations are most likely due to normal fluctuations in demand inherent to the coffee industry, investors turned sour and sent shares tumbling 30% in after-hours market trading.  For more information click here.

GMCR Addresses Einhorn's Criticism

Another big story coming out of GMCR today was that it addressed criticism from David Einhorn.  The CEO of GMCR, Larry Blanford, said that the company hired an audit committee that found no misconduct or wrong doing with GMCR.  He also added:

“We understand with success comes scrutiny, and at times skepticism.”

Unfortunately, these positive comments did not prevent the drastic after hours share price decline.

What to do Now

As an owner of GMCR shares, I have held onto my position all the way through this crisis.  My investing strategy is to stick with a company unless my investment thesis for it has changed.  As I see it now, GMCR still has a strong product that will continue to produce high revenues and earnings in the future.  Investors must understand that GMCR's missing earnings and revenue expectations are simply a byproduct of the company's wild success.  If it hadn't been performing so well in the beginning, expectations wouldn't have been so high!

Having said that, I do not believe that RIGHT NOW is the best time to invest in GMCR.  With so much skepticism surrounding the stock amidst the Einhorn allegations, it is best to let the stock settle a bit before investing.  If you REALLY want to invest in GMCR, I would recommend pursuing a dollar cost average strategy where you invest a third of your intended investment now, another third a month from now, and a final third three months from now.  This way you will protect yourself and possibly benefit from possible price fluctuations.

Michael R Caligiuri owns shares in GMCR

Green Mountain Coffee Roasters Oversold

There are two possible reasons that GMCR shares have fallen 40% since David Einhorn's recommendation to short the stock:

1. Einhorn's analysis of GMCR was indeed correct and GMCR shares were grossly overrvalued

2. Investors simply sold off their shares in GMCR out of fear. Fear the almighty Einhorn!

I'm not buying Einhorn's recommendation and thus believe that investors sold their shares in GMCR out of fear.  Although I admire David Einhorn and his brilliant analyses of companies, I think it was his stellar reputation that was responsible for GMCR's fall rather than the rationale provided in his analysis, which can be found at this link: http://tinyurl.com/6zoztck.  Sure, Einhorn has had many successful short-sell recommendations such as Lehman Brothers, but all investors make mistakes.

Einhorn's two biggest reasons for shorting GMCR were unethical accounting practices and a likely loss of market share due to patent expiration.  I guess I can't really argue with Einhorn on either one of these points, but that's only because we have known both of these things for a while now.  Every stock analyst on the market and their mother knew exactly when GMCR patents were going to expire (this was explicitly stated in the 10K).  Furthermore, GMCR accounting practices had already been in question before.  If stock analysts and investors believed in GMCR prior to David Einhorn reciting information that they already knew, then why did so many people sell their shares? Fear.

The bottom line is that GMCR has a very strong product that has plenty of room to grow.  Although there will be new entrants to the K-cup industry, GMCR's first mover advantage and long term contracts with powerhouse coffee companies such as Starbucks and Dunkin Donuts should help it maintain its competitive advantage.

Michael R Caligiuri owns shares of GMCR

Buy InterDigital (IDCC)

Google Buys Motorola


The big news of the week was that Google paid $12.5 billion dollars to acquire Motorola.  The purpose of this acquisition for Google was to substantially increase its patent portfolio to make it more competitive (and perhaps the top dog) in the mobile phone market.  Because Google paid a 63% premium for Motorola, Motorola shareholders were rewarded with a 63% share-price increase in one day.

An Arms Race for Patents


A very important factor for success in the mobile phone market is access to patents.  Google took a big step forward by acquiring Motorola, but there are still many companies with desirable patents out there.  Two of Google's main competitors in the mobile phone market include Microsoft and Apple.  Both of these companies have huge cash positions; Microsoft has over $51 billion of cash and Apple has over $20 billion of cash.  The word on the street is that Microsoft, Apple, and potentially Samsung are looking to acquire more patents to stay competitive with Google.

The company with the most desirable patent portfolio according to many sources is today's recommendation InterDigital (IDCC).  With a market capitalization under $3 billion dollars and a patent portfolio that could potentially be worth $20 billion dollars, Interdigital has a TREMENDOUS potential return.  I'm talking about over 500%.

For a more detail analysis of IDCC's patent portfolio value check out Seeking Alpha's write-up.

Downside Limited


Although we never know exactly how the market will behave, Interdigital shares do not appear to be super overvalued.  In other words, IDCC is a pretty good company in its own right with the added bonus of potentially being bought out by Apple, Microsoft, or Samsung.  IDCC has been successful with its patent portfolio business by increasing both revenues and cash flow consistently year in and year out.  In addition, all the profit margins are extremely high, which is to be expected from a company that simply collects royalties for its patents.  Whether or not IDCC gets bought out, it will continue to receive royalties for an expanding mobile phone technology market.

This is the type of company that you have to be patient with.  Because there is so much speculation as to whether or not it will get bought out, the share price will no doubt be volatile.  However, the bottom line is that IDCC's patent portfolio is worth A LOT of money.  I believe that the huge upside and seemingly small downside to IDCC make it an attractive risk vs. reward investment.  Remember to invest responsibly and never allocate too much of your portfolio to any one stock!

"Seeking Alpha" Likes VPRT

Below is an excerpt from SeekingAlpha.com in regards to VistaPrint; definitely a good read.

VistaPrint NV (VPRT) has seen loss in excess of 35% over the last month. The company announced earnings on July 29 which reflect revenue growth of 27% and net income of $14.4 million over $11.7 million year over year. This financial report caused the stock to decline along with guidance below analyst expectations. The company has increased revenue, EPS, and assets each year over the last 5 years. In addition, the company has eliminated it's total debt during the last 5 years and currently have no debt. The company announced potential EPS of $5 and revenue of $2 billion by 2016 which show the company expects continued growth over the next several years.

I believe this stock is offering investors the perfect buying opportunity, regardless of how the markets feel about the company not meeting EPS expectations. Revenue is growing at the same rate and EPS has increased year over year, and is projected to continue. I expect P/E to increase along with earnings, making the current price of $28.35 a bargain for any investor.

Buy Vistaprint (VPRT)

The Business


Vistaprint is the premier resource for small businesses.  Whether you need to make a website, create and distribute business cards, mail special reports to clients, or create an email database, Vistaprint has all the answers.  In fact, Vistaprint has a specific niche in the market for micro-businesses that have ten employees or fewer.  Although this may seem like a small market, Vistaprint's research has shown that there are at least 50 million micro-businesses in the United States, Europe, and Canada alone.  This global perspective has influenced Vistaprint to diversify its business, which can be shown through their revenue distribution: 57% of revenue comes from North America, 38% from Europe, and 5% from Asia Pacific.  It is important to note that Vistaprint is pursuing increasing its footprint in the Asia Pacific market.

The Stock


Vistaprint appears to be a very attractive growth investment because of its strong financials and solid value.  Compared to last year, revenue and earnings growth have increased over 21% and 22%, respectively.  This means that Vistaprint has successfully expanded its business in North America, Europe, and Asia Pacific.  With zero debt and over $230 million dollars have cash, Vistaprint is poised to continue its aggressive expansion and increase its customer base.

Over the past month, shares of Vistaprint have dropped 42%.  For a company of this quality, the share price drop is quite astounding.  Aside from the market getting beat up in general, Vistaprint shares dropped because they produced lower than expected earnings expectations for next year.  Despite the large sell-off, Vistaprint has a very sound business plan to continue its expansion.  With a market capitalization of $1.29 billion and a P/E ratio of 16, I believe that Vistaprint represents tremendous value.

Side Note


Remember not to allocate too much of your portfolio to any one stock.  A general rule of thumb is not to let any stock represent over 10% of your portfolio, and to also own at least 20-30 companies.

Michael R Caligiuri owns shares of Vistaprint.

Good Vera Bradley Article

Below is an article on Vera Bradley stock from Streetinsider.com.  I still would like to see the long term investments start to pay off before purchasing shares again.

Wells Fargo Upgrades Vera Bradley (VRA) to Outperform; Not A Falling Knife

August 3, 2011 7:32 AM EDT 

Wells Fargo upgraded Vera Bradley (NASDAQ: VRA) from Market Perform to Outperform, price target range of $39-$41.

Wells analyst says, "When we downgraded the stock on May 12th, it was due to our view that the valuation looked full at $50.37; today, VRA's growth opportunities are essentially unchanged and at $31.95, we think that a tougher macro environment is priced in and there is 22-27% upside potential to our valuation range of $39-41. We feel comfortable with our estimates (which assume some slowdown in 2H vs. 1H) and see potential upside in 2012 from a likely Dillards rollout and lower cotton prices. VRA's valuation has contracted significantly relative to other growth names over several concerns that could be resolved over the next several quarters. Short interest has risen dramatically to 23% of the float. We believe VRA has a proven brand (29-yr history), significant growth opportunities (retail, wholesale and international) and strong operating margins (20.5% in 2010; only Coach (NYSE: COH), Lululemon (Nasdaq: LULU) and Tiffany (NYSE: TIF) have higher margins)."

For more ratings news on Vera Bradley click here and for the rating history of Vera Bradley click here.

Shares of Vera Bradley closed at $31.95 yesterday, with a 52 week range of $22.00-$52.36.

Sell Vera Bradley (VRA)

Why sell?


I still believe in the long term future of Vera Bradley, but I do not think it is the best stock to have in your portfolio right now.  The company has committed to long term growth instead of meeting short term earnings expectations.  Investors have already started placing puts (betting against the stock), and the share price continues to fall.  I do not know exactly when Vera's long term investments will start to result in strong cash flow generation, and because of that I do not feel comfortable owning the stock.

Potential pick later on

In terms of long term valuation (5-10) years, I believe that Vera Bradley stock is heavily undervalued.  There is a good chance that I could recommend to buy Vera again.  Furthermore, when Vera's long term investments do start to pay off, the stock will most likely take off like a rocket.  As investors, it is important to know when to cut our losses.  Although it may seem painful to sell Vera after a 35% drop, it is the necessary thing to do.  There are better investment opportunities in the market right now; and the best time to sell is when there is a better investment opportunity.  It definitely stings for me to have picked a loser, but the fact of the matter is that Calinvestments has indeed performed well on aggregate.  Despite Vera's 35% drop, Calinvestments growth strategy has resulted in big winners such as Mako Surgical (up 20%), Panera (up 27%), LinkedIn (up 30%), Lulu Lemon (up 95%), and Green Mountain Coffee Roasters (up 144%).

Debt Ceiling

What to do

Don't do anything.  Many of you have probably seen your portfolio values drop drastically over the last month and are wondering whether or not you should make changes.  Many investors are putting their money in cash or shifting their assets into more stable market sectors.  While this strategy of moving your money into less volatile places may make you sleep better at night, it is not the best way to manage your portfolio.  Of course the advice above only applies to long term investors who do not need their money anytime soon.  If you are a short term investor trying to make a quick buck, you've probably learned that investing in stocks is like swimming in the middle of the ocean, you're helpless to the forces of the market.

Is the United States going to collapse on August 2nd?

No.  Although CNN, CNBC, and Fox News make it seem like August 2nd is Judgement Day, its not.  Sure, the market might drop a little bit, but in the long run the United States is going to be fine.  A more important point is to not think with such a macro lens and to think with more of a micro lens.  I commonly see people pull their money out of the markets if poor housing data or job data is released, but does this even make sense?  You have to ask yourself how all the economic data actually tangibly affects the individual stocks in your portfolio.  For example, if the United States doesn't get the debt ceiling raised by August 2nd, how much is that really going to affect the amount of coffee Green Mountain Coffee Roasters sells over the next 5-10 years?  How much is it going to affect how many surgical machines are purchased from MAKO Surgical?  Not very much at all.

Investor Psychology

When the news stations are claiming that the world is going to end and your portfolio value is dropping, your natural inclination is to act; well, your natural inclination is wrong.  This is the very reason why the average investor has an average annual return of less than 2% compared to the S&P 500's 10%.  Don't sell if you're in it for the long run.  Believe in the stocks in your portfolio.  

More Stock Picks

I believe that the recent market downturn has created some pretty attractive investment opportunities.  Stay tuned as a couple stock picks will be coming soon.

LinkedIn (LNKD) Update

Original Recommendation


On Wednesday, May 25th I recommended to invest in LNKD using a dollar cost average plan.  You can click this link for the original write-up.  The excerpt below is a specific reference to the dollar cost average plan:


"LinkedIn will no doubt be a volatile investment.  Some days it will decrease in value a lot, and some days it will increase in value a lot.  Because of this, I recommend dollar cost averaging.  This is when you stagger your investments.  For example, if you plan to invest 1,000 dollars in LinkedIn, stagger your investments over a three month period.  Invest 333 dollars now, 333 dollars a month from now, and 333 dollars two months from now.  This will help you account for crazy price swings by averaging out your purchase price."


As it turns out, the price of LNKD has indeed been very volatile.  Check out the 2-month graph below.  Over a two month period, the share price decreased from $93 to $63 (32% drop), and then increased from $63 to over $100 (59% jump).

If you followed the dollar cost average plan that was suggested, you would have invested a third of your money on Wednesday, May 25th at a share price of $94.33 and another third on June 25th at a share price of $69.94.  Let's see the difference that this makes below:


Did not use dollar cost average method:  Your investment would have increased 8.5%.


Used the dollar cost average method:  You would be up 8.5% on your first 1/3rd investment, and up 46% on your second 1/3rd investment.  So, when taking into consideration that you would have only invested 2/3rds of your money, you would be up 18.16%.  And you would still have another third of your money to invest on July 25th!  The math is below:

8.5% return X 33% of the intended investment = 2.83%

+

46% return X 33% of intended investment = 15.33%

=

18.16%

In summary, despite only investing 2/3rds of your intended investment, the dollar cost average method yielded a return on investment of over twice that of not using the dollar cost average method.

LNKD Going Forward

I still believe LNKD is a good long term investment, and thus would recommend finishing out my original dollar cost average plan.  LNKD has been growing at a very rapid pace and is now the #2 social networking website in the world ahead of both MySpace and Twitter, but behind Facebook.  For more details read this article.

Quantitative vs. Qualitative Investing

Quantitative vs. Qualitative Investing

When an investor is deciding whether or not to purchase stock in a company, he or she should perform a qualitative and quantitative analysis.

Qualitative Analysis

A qualitative analysis is basically the non-numbers analysis.  This consists of an evaluation of a company’s brand, mass marketability, competitive advantage, leadership, growth potential, etc.

Qualitative investors care more about the long-term growth potential of a company rather than short-term price fluctuations.  Companies that are currently attractive to qualitative investors, but not to quantitative investors would include Google, Chipotle, Amazon, and Netflix.  When Google, Chipotle, and Amazon had their initial public offerings (IPO’s), quantitative investors claimed that the companies were overvalued.  In contrast, qualitative investors claimed that the future for these companies what limitless.  In a way, both investors were correct.

The qualitative investors were correct because Google, Chipotle, and Amazon ended up being incredibly successful.  An investment in these companies at the time of their IPO’s would now be worth a fortune [this is not true for Google...it's worth 2-3 times its IPO, not "a fortune".  I would say: An large investment in Chipotle and Amazon at the time of their IPO’s would now be worth a fortune, while such an investment in Google would have more than doubled. 

In the quantitative section below, I will explain why the quantitative investors were also correct.

Quantitative

A quantitative analysis is an analysis "by the numbers".  This entails pouring through a company’s financial statements to create a fair trade value.  In other words, quantitative investors look at the current financials of a company to place a price tag on it, and ask if the stock price is significantly above that price tag.  Ratios that quantitative investors put a great emphasis on include the price to earnings ratio, price to book ratio, and PEG ratio (PE ratio divided by the growth rate).

So why wouldn’t a quantitative investor have invested in Google, Chipotle, or Amazon’s IPO?  The answer is that all of these companies appeared grossly overvalued at the time of their IPO.  All of the ratios mentioned above that are important to quantitative investors were astronomically large at the time of their IPO.  For example, when Amazon had its IPO in 1997, the company’s market value was $438 million.  However, the company appeared overvalued because it had not yet even made a profit.  So, if Amazon even earned $1 million, the P/E ratio would have been astronomically high at 438.  Quantitative investors would have a heart attack at the sight of a P/E ratio that high, and probably would have shorted the stock, figuring it was doomed to fail.

The quantitative investor would have been correct in not buying Amazon, because it was not necessarily a good short term investment.  Like many great success stories, there were times when Amazon’s share price was plummeting and short term investors sold their Amazon stock and unfortunately never reaped the subsequent astronomical returns.  Amazon is now worth over $84 billion dollars representing a return on investment of 191,680% from its IPO.  Pretty good!

LinkedIn, Vera Bradley, MAKO Surgical, Green Mountain Coffee Roasters

All of these recommendations are qualitative investments.  It is to be expected that price fluctuations will be great.  We have already seen investments such as MAKO Surgical and Green Mountain increase tremendously in value, however, we have also seen investments like Vera Bradley and LinkedIn decrease in value.  The trick is to "weather the storm" and hold on for the long term if you believe, as I do, that these companies have great products and great leadership that will ultimately dominate their respective markets.  You don’t want to be like the quantitative investor who sold his/her stock in Amazon because the price went down in the short term.  You want to be the qualitative investor who held onto his/her investment and through thick and thin, only to finish financially far, far ahead of the crowd.

Vera Bradley Price Drop

Price Drop


Shares of Vera Bradley dropped 13.82% due to lower than expected quarterly earnings.  For a full article of the news release please click here.

What Now?


Don't panic and don't sell!  Because we are investing in Vera Bradley for the long term, we are more concerned with how it is positioning itself for the future rather than how it is performing in the short run.  Earnings were lower this quarter because the company has been investing in itself to grow.  In order to pay for new stores in Japan, Vera used excess cash from its earnings.  Looking at this through a long term investment lens, it is great that Vera can use its earnings to grow instead of taking out huge loans that it can't really afford.  In addition, Vera grew its revenues by 19% and raised revenue expectations for next year.

Investor Psychology


Here's a fun fact: While the average investment returns about 10% per year, the average investor has a return of under 2% per year.  Why is this?  Because of the nature of human psychology, investors always want to sell when their stocks are losing money, and buy more when their stocks are making lots of money.

Although Vera shares dropped in value today, you haven't actually lost any money.  You only lose money when you actually sell your shares.  I still feel strongly that Vera will be a great investment over the long run, and I recommend to hold onto your shares.  If you have enough cash to invest, I would recommend buying more.  Buy low and sell high!

Buy LinkedIN (LNKD)

Successful IPO


Last Thursday LinkedIn had an incredibly successful IPO.  Shares were originally offered for a price of $45, and by the end of the day were trading for around $94 (an increase of over 100% in a day!).

From 9:30am until 4:00pm, I watched all the "experts" on CNBC proclaim that LNKD shares were overvalued.  The funny thing was that the share price just kept on rising!  The "experts" were left scratching their heads.

The Business


LinkedIn is emerging as the most powerful recruitment database in the world.  A growing number of college graduates, including myself, create professional LinkedIn profiles in order to help themselves get jobs.  Below, you can follow a link to my personal LinkedIn profile:

http://www.linkedin.com/pub/michael-caligiuri-de-jesus/33/4b1/b38

Why is LinkedIn so popular?  Like Apple products, LinkedIn is more user-friendly than its competitors.  It was incredibly easy for me to make a LinkedIn profile on the internet, and it is even easier for recruiters to find me.  In addition, LinkedIn enables users to create a "network" of people.  This network can include anyone that is willing to accept you as a connection.  For example, my connections include my two sisters and my friends from the University of Michigan.  This network will also expand to my current and past employers.

What LinkedIn has that every company in the World wants is INFORMATION.  For example, LinkedIn knows where I am from, where I studied, who I know, and where I have worked.  In order for a recruitment department of a company to efficiently sort through this information, they must pay for access to it.  This internet access to recruitment information helps companies cut down on costs and increase production, which in turn will turn the recruitment industry upside down.

Another huge revenue stream for LinkedIn is selling advertising space.  Because LinkedIn has so much access to my information, they know exactly what type of ads to show me while I am updating my profile.  For example, I have seen many ads for internship positions at financial institutions that I would love to work for.  This serves as a great way for companies to efficiently market to their target audience.  In this way, LinkedIn is much like Google.

Below is a Video Explaining LinkedIn.  If you are receiving this via email, please click this link.

Google All Over Again


When Google's IPO came out with a market capitalization of 27 billion dollars, all the "experts" were kicking and screaming that Google was way too expensive and overpriced.  Well, Google is now worth over 170 billion dollars.  The "experts" were dead wrong.

In order to distinguish whether or not LinkedIn is overpriced, it is important not to look at current financials but instead to look at future potential.  LinkedIn has already begun to revolutionize the talent recruitment industry, and I highly recommend to hop along for the ride.

Dollar Cost Averaging


LinkedIn will no doubt be a volatile investment.  Some days it will decrease in value a lot, and some days it will increase in value a lot.  Because of this, I recommend dollar cost averaging.  This is when you stagger your investments.  For example, if you plan to invest 1,000 dollars in LinkedIn, stagger your investments over a three month period.  Invest 333 dollars now, 333 dollars a month from now, and 333 dollars two months from now.  This will help you account for crazy price swings by averaging out your purchase price.

Buy Vera Bradley (VRA)

The Business


Vera Bradley (VRA) is a top designer of handbags and other accessories for women.  Of course, what makes this company successful is that it has a name brand.  Similar to other successful fashion stores, like Louis Vuitton and Coach, Vera Bradley is able to leverage its name brand to successfully charge high premiums for its products.

Vera Bradley has created a very interesting niche in the fashion market.  In simple terms, Vera Bradley is able to consistently produce the new fad.  More specifically, Vera Bradley consumers anxiously await Vera's new product releases so that they can have the newest and coolest accessories.  Furthermore, Vera has somehow moved beyond merely being a product designer, and has created a club-like culture within its customer base.  Just imagine Regina George and her possy walking down the hallways in the movie "Mean Girls" with matching Vera Bradley handbags.

Unlike many other name brand designers, Vera's handbags and accessories are actually affordable.  This not only increases Vera's customer demographic, but it is another factor that influences customers to make repeat purchases.  Below are some pictures of the fashionable Vera Bradley products:



Financially Strong


Vera Bradley looks very impressive through a financial lens.  With profit margins and operating margins of over 13% and 22%, respectively, Vera clearly shows that it is making very good money off of its affordable product portfolio.  Furthermore, Vera has proven that it can grow its business very effectively by increasing sales by over 26%.  Not surprisingly, expectations are high as the market expects Vera to increase earnings by 23% per year over the next five years.

Valuation


Shares of Vera look expensive right now with a price to book ratio of 31 and PE ratio of 40, however the shares are expensive for a reason.  For investors who are in it for the long run, I recommend to buy shares of Vera Bradley.  Because of their strong branding and customer loyalty, I can see Vera being a multi-bagger for investors over the next 5-10 years.

Hansen Medical (HNSN) the Next Big Winner?

Dr. Frederic H. Moll


Here are some quick facts about Dr. Moll:

• Co-Founder of Intuitive Surgical (ISRG)
• Director of MAKO Surgical (MAKO)
• Co-Founder of Hansen Medical (HNSN)

For more on Dr. Frederic H. Moll, click here.

Below you can see the share price performance of both ISRG and MAKO (all from Yahoo! Finance).

Above shows you a 1,732% return since 2002

Above shows a 317% return since 2009

Three Apples From the Same Tree:

ISRG, MAKO, and HNSN are all basically the same thing (at least to an investor).  All three companies have patents for robots that perform surgeries with better precision and accuracy than anything else on the market.  Even better, the surgeries performed by the robots are both very common and very expensive!  The quality of the robots, combined with the commonality and price of the surgeries, lead to huge profits, which in turn lead to great profits for investors (just take a look at the charts above!).

Brief Description of Hansen Medical

Hansen Medical, Inc. develops, manufactures, and markets medical robotics designed for accurate positioning, manipulation, and stable control of catheters and catheter-based technologies.

-Fidelity.com

Below is a short video of Hansen Medical.  If you are receiving this via email, please click this link.

Official Recommendation:

As of right now, buying stock in Hansen Medical is too risky.  However, like Zipcar, I will be monitoring Hansen to see if a good investment opportunity arises.  Stay posted!

Buy MAKO and NXTM

Price Drop:

MAKO and NXTM shares plunged today more than 6% and 12%, respectively.  Despite the fact that both companies have been increasing revenue wildly, the market was upset that earnings were not higher.

Long Term vs. Short Term

Short term investors freak out when companies do not meet earnings expectations, long term investors look at the bigger picture.  In the case of MAKO and NXTM, at this early stage of the game, revenue growth is far more important than earnings growth.  As investors, we are most concerned about whether or not MAKO's and NXTM's products are being accepted into the medical community.

If you are new to Caligiuri Investments or need a refresher on MAKO, please click here.

Recommendation of NXTM:

Nxstage Medical has the patent for a home dialysis machine.  Currently, patients must go to the hospital to receive their dialysis treatment, so NXTM provides a much more convenient treatment solution.  In addition, NXTM's dialysis machine has been accepted into the medical community and has experienced tremendous growth in sales.  If NXTM continues to penetrate the dialysis patient market, as I expect it will, investors will rake in the profits.

Green Mountain Coffee Roasters (GMCR) up 21% After the Bell

Congrats to all those who invested!

If you plan to hold GMCR for the long run, I recommend to hold your shares.  If you have not yet invested in GMCR, wait for things to settle down before you invest.  It is common place for a stock to drop the day after a big share price jump.

Here is an article about the 21% share price increase after the bell:

http://tinyurl.com/3z7lp79

Michael R Caligiuri owns shares of GMCR

Zipcar has IPO: 56% Increase

For more information on Zipcar's IPO, please click this link.

Zipcar Overview

Zipcar is an innovative rental car company that has sparked the interest of many investors.  To me, it seems like the Netflix of the rental car industry.  The Zipcar business model is incredibly convenient for customers, which I think will ultimately result in customer retention and loyalty.

How does Zipcar work?

1. Join: 
• You pay an initial fee to have a Zipcar membership.  You will receive a "Zipcard" that will function as a key.
2. Reserve: 
• Sign up for a time-slot when you need a car.  You can also choose to reserve a car for a full day.  Hourly rates are usually $9, while a full day will cost about $70.  It's important to note that gas and insurance are included.
3. Drive:
• Your Zipcar will be ready for you at a parking spot close to your location.
4. Return:
• Return the car back to the original parking spot. 

Final Thoughts

Zipcar has what I love, an innovative and patented business model that "smells right."  Because Zipcar is a relatively young company, it has yet to turn a profit.  This will no doubt be a concern for many investors, however I believe that Zipcar will be profitable in the long-term.  If I had to guess, Zipcar will receive immense interest from outside companies such as Ford and Toyota.  In the end, I believe that this will be at least multi-billion dollar company.

I would advise investors not to invest in this company until more information about its financials are released.

Buy MAKO Surgical

What is MAKO Surgical?

The MAKO Surgical robotic arm provides an innovative orthopedic knee repair procedure.  The surgery has proved to be wildly successful and is already being adopted at a fast pace.  Anyone who suffers from osteoarthritis of the knee should seriously consider undergoing a MAKO Surgical procedure.

For a more detailed analysis please see the video below.  If you are receiving this recommendation via email, please click this link.

Price Jump

Shares of MAKO Surgical jumped over 10% today on news that 11 more MAKOplasty centers (MAKO Surgical robot centers) will open during 2011.  For more information on the price jump, click this link.

Room to Grow


Patents mean profits baby!  MAKO Surgical has the patent on its robotic arm, so it has the ability to charge high premiums due to a lack of competition.  There are more than 15 million people in the United States alone who suffer from osteoarthritis of the knee.  Right now, MAKO performs knee surgeries on less than 1% of of the applicable population in the U.S.  This represents a very large untapped market-share.

MAKO's robotic arms are being adopted at a very fast pace, and I fully expect this aggressive growth to continue.  Time to get on the bandwagon now before its too late!

Michael R Caligiuri owns shares of MAKO Surgical