Saturday, October 11, 2008

Investing (Your Time) in

Silicon Valley startup has been generating a ton of buzz online for those looking for tools to help manage their money.

Very Brief Overview aggregates your financial accounts all onto one page so you can easily see your network and the components that make up some of your assets and liabilities. This is very similar to other programs that many banks now offer except went a few steps further and invested in a very nice user interface. Well, at this point it sounds as if there is nothing special about, but there is more!

Increase Savings with Mint will present you with recommendations that can help you save money when you link your financial accounts such as banks, credit cards, investment accounts, and so forth. For example, offered a better checking account through Schwab when I linked a low yielding savings account. It said I could save a few hundred more each year if I open an account with Schwab.

If you sign up for a Schwab account (or any offer via Mint earns a slight commission. When you save, brings home the revenue so they have a strong incentive in place to help you save since. They only make money when you save! Obviously better deals could be found by some basic research, but I'm sure the extra savings is good enough for the financially uniformed and the average American. Overtime, I can see displaying banner and text ads to help them boost profits.

Privacy Concerns: claims to have top notch security, but what about the data they collect? By giving them access to our spending habits they have valuable information. They know before Wall Street if there has been a change in Consumer Spending and they can closely monitor the pulse of the economy. Their privacy policy allows them to do this and I don't have a problem with with doing this. Their service is free and inorder for it to be free we typically have to give something up. In this day and age, I expect there to be more free and similar services to that gives us a small service for free in exchange for our data and the ability to directly target the right audience so that everyone benefits. It seems to be a win-win situation.

Categorized spending: categorizes your spending into buckets for you such as entertainment spending, restaurant, spending, auto care, and so forth. This allows you to get a better understating of how your money is being spent. Of course, the categorization is far from perfect and many items tend to be miscategorized or simply uncategorized. I tried to spend a few frustrating hours placing my previous purchase in categories, but found that it was simply too much work. I expect this feature to improve as receives more data and feedback from users.

Comparable Spending:
Spending habits across categories can be compared to the US average to let you know how your peers are allocating their spend. You can even compare your spending habits to those in a specific State or US City. While this feature is cool, I'm not sure what the data means. Is the data from other users who may have categorized their data incorrectly? Also is it for individuals or households? I imagine a husband and wife may have different spending habits compared to a single person. It would be great if would allow us to compare our spending habits to the appropriate demographic.

Suggested Changes:
I wish allowed users to download current and historical financial data so that we could also manipulate the numbers how we see fit. One feature for the investment section should be a portfolio comparison section that would tell the user how well their portfolio is performing against the relative benchmarks. I imagine they could also present portfolio metrics such as alpha, beta, and standard deviations to we could tell if our portfolio managers are really beating the market. At this time, I have not found a free online product that provides portfolio analytics.

Bottom Line: Cool Product and it will be exciting to see it develop in the next year.

Saturday, October 4, 2008

High Yield Saving Account Options & MoneyAisle

Given these harsh economic times with runaway inflation it is important for you to make sure that your liquid assets are in a safe location that can still provide a small return and generate extra income. Keeping your money in a account yielding 0.05% won't do you any favors in the long run.

One new site called MoneyAisle allows banks to bid for your assets. You simply enter an initial deposit and state and in seconds you will enter into an auction where banks will start bidding. After about a dozen quick rounds that take about a second each MoneyAisle will present you with the bank that is willing to offer you the best yield. Pretty cool, eh?

There are a few things I really like about the site:
1. Banks compete for your money. No need to do the extra research.
2. All banks are FDIC secured. No need to worry about the bank failing in these uncertain times.
3. You have no obligation to accept the offer. This gives you the opportunity to try a few times through a week to see if you can find higher yields.

MoneyAisle is a great way to help banks raise quick capital and also helps smaller banks compete with larger banks by showing up on the consumers radar. Any company that manages to take friction out of a business process tends to do well. I expect MoneyAisle to grow into a very profitable business and eventually offer other types of products such as insurance.

Here is a list of other opportunities if you don't feel comfortable with MoneyAisle or you wan't to compare the rates that MoneyAisle offers you.

1. Washington Mutual Bank is offering a 4.00% yield.
2. is offering 4.00%
3. E8Trade Bank is offering 3.30%
4. HSBC is offering 3.25%
5. ING is offering 3.00% (perhaps the yield is lower due to all the ad dollars spent on marketing).
6. Citibank 2.25%
7. BankofAmerica 0.20% or something pitiful! Only use them if you need convince or have few little cash.

With the lack of easy credit facilities I expect interest rates to remain relatively competitive as banks needs to find cheap sources of money. Of course moving cash from one bank to another won't won't the credit crisis, but it will help you earn more!

Saturday, September 13, 2008

Chase Freedom Reward Credit Card

The Chase Freedom Reward Card is a highly recommended card for low to moderate spenders who are looking to earn healthy rewards by using their credit card on most purchase. The Chase Freedom Card essentially offers you 1% cash back on all purchases and an extra 2% (so a total of 3%) in your top 3 categories of purchases. The available 15 categories are:

1. grocery stores

2. gas & convenience stores

3. quick service payment/fast food restaurants

4. telecommunications

5. cable/satellite TV/Internet service providers

6. video rentals

7. department stores

8. dry cleaners

9. drugstores

10. movie theaters

11. local and suburban commuter passenger transportation

12. pet supply stores and veterinary services

13. utilities

14. beauty salons and spas

15. gym/recreation memberships

What’s best about this card is that as your purchasing patterns change your rewards also change without you having to worry about which one of your rewards card to use! This is great since it helps you be prepared for the unexpected such an illness (drugstore rewards) or a pet emergency (veterinary services rewards).

Sounds too good to be true? Yes,this card is NOT ideal for high spenders. Chase limits the bonus rewards in the top 3 categories to only $600 of spend. Of course you could have multiple credit cards and switch to a different card once you spend $600 in your top categories, but it probably is not worth the time it takes to track your expenses.


The Discover Cashback Card offers5% in categories predefined by Discover Card that rotate every month. For example, In January – March of2008 the Discover Cashback Bonus card offered 5%rewards for airlines, cruises, hotels, and car rentals. If you didn’t use any of these services in the first quarter of the year it was your loss. Flexibility is the best reward with Chase Freedom since it really does give you the freedom to earn where you spend the most.

Falling Sign up bonus?

What’s better than a credit card that offers high rewards? A card that pays you to sign up and offers great rewards! Right now, Chase is offering $50 for anyone who signs up and qualifies for the card. Unfortunately, the $50 is not what Chase used to offer for the card. About a year and a half ago when the card was new and not heavily marketed there was a link on the forms that offered $250 for signing up for the Chase Freedom Credit Card! Over time, the sign up reward fell to $150 and then it’s present state of $50.

I believe Chase has a target customer acquisition cost of about $250. As Chase started to advertise on traditional media such as TV, their customer acquisition costs went into raising awareness about the card. As a result, the instant reward Chase could offer consumers plummeted. I’d guess that for every new customer, Chase is now willing to spend up to $200/new customer on traditional media or through an affiliate program.

Do you get your money from Chase?

I’ve heard some stories about Chase making it extremely difficult for new customers to claim their reward for signing up for the card. Customers should be sure to print the offer and keep it on file until they receive their reward from Chase.

Saturday, February 9, 2008

Telular Report (WRLS)

WRLS Abstract -07/2007
At first glance, Telular Corp appears unimpressive, as the company has no profits in the past few years. However, with the introduction of Telguard digital products and a new FCC mandate, Telular stands to gain almost 400,000 customers by 2008, a growth of almost 200%. In analyzing the company’s cash flow, we see the stock is currently undervalued. Thus, I recommended that Telular is a Buy, as the company has great potential to increase its subscriber base within the next few quarters.

Introduction on Telular
Telular Corp is a micro cap communications company. The company has two main product lines: the Fixed Cellular Terminals division (FCT) and the Fixed Cellular Phones (FCP) division. The FCP market is considered much more competitive than the FCT market. The FCT unit is poised for the strongest growth in the wireless security segment.

Telular’s important product, Telguard, provides wireless communications for security systems and acts as a backup when a telephone line is cut. In FY 2006, Telguard experienced a growth of 232% in sales, increasing it to $21.6 million. The driver behind this growth is the introduction of the Telguard digital products. Driven by the sale of more Telguard units, service revenue from the FCT division increased 23% to $11.1 million for the 2006. The competition comes from Ericsson Radio Systems, Huawei Technologies, and LG Electronics (Annual Report 2006). Competition for the wireless security market also comes from AES-InteliNet Corporation, which provides communication through a free wireless mesh network. This could pose a significant challenge to Telular as unlike Telular, AES-InteliNet’s network does not require a subscription fee. The company has 25 patents along with 5 pending patents that can help provide successful barriers to entry in this competitive market. Currently, Telular is the only company whose product can work with any alarm system.

Future Prospects of Telular
At first glance, the company appears unimpressive, as it has not had profits in the past few years. However, this may be about to change as the Federal Communications Commission (FCC) has recently ruled that after February 18 2008, wireless carriers will no longer have to support analog devices that provide backup wireless security. According to the Q1 conference call with Telular, approximately 600,000 to 1,000,000 homes will have to be upgraded to the digital standard. Telular may gain from this transition as new subscribers can bring in recurring revenue. Also, Telguard can act as a link for 911 services for those with VOIP service.
In Q2 of 2007, Telular had about 220,000 subscribers to Telguard, which translates to a 65% market share (Telular Investor Presentation, slide 12). Using the conservative 600,000 homes and a 65% market share, Telular stands to gain 390,000 new subscribers who are switching from analog to digital services in the next few quarters. Adding the current subscriber base to the projected new subscribers will increase the number of subscribers to 610,000. Furthermore, not only does Telular stand to benefit from a one-time increase in customers, but the market is continuing to expand since the digital cellular alarm communicator costs less. This allows for more penetration into the residential market. New subscribers grew in Q1 of 2007 by an additional 44,000 and in Q2 by 42,000. On a forward-looking basis, about 40,000 new subscribers are expected per quarter, not including those who are switching from analog to digital (in the Q1 conference call, Telular acknowledges that most of the new subscribers were not previous analog subscribers). As more and more consumers opt for the wireless alarm or VOIP service, the number of subscribers to Telular may increase, but a conservative subscriber user base was used to better reflect risk due to the to the likelihood of increased market competition and new technology.

Future Cash Flow Analysis of WRLS
Based on the balance sheet is appears as if the profit margins for the subscription service stand around 50%. According to the investment presentation, customers pay about $50 per year in monitoring costs (Telular Investor Presentation, slide 14). This translates to the company earning $25 per subscriber each year. A corporate tax rate of 30% should reduce income to $17.5 per subscriber each year. To value Telular’s cash flows, the expected flows are discounted to present value with an appropriate discount rate. The current one year LIBOR rate of 5.43%, an assumed market risk premium of 3%, and a beta of two were used. Therefore, the cost of capital for the firm is . The model shown below assumes that there will be 690,000 subscribers in 2008 (the current 220,000 + 80,000 estimate for the rest of the year + 390,000 upgrading from analog to digital) and that subscriber growth will continue to grow by 160,000 users per year until 2013. The present value of future cash flows is calculated as

=$184,373,935/18.24 million shares outstanding

This simplified discount cash flow analysis shows that the stock should be trading at $10.10/share and, based on the current stock price, is currently undervalued.

Current Standing of WRLS
By Q2 of 2007, FCT revenues of $16.3 million have far surpassed the FCP division revenues of $4.6 million, a stark contrast to the total revenues from FCT of $44.6 million and FCP total revenues of $48.5 million in FY 2006. FCT sales are expected to continue to increase as the company seeks to expand its international sales. By Q2, gross profit margins increased to 26% from almost 20% in FY 2006, reflecting the changes at the company as Telguard sales and services are becoming the cash generator for the business. Despite the higher gross margins, Telular was not profitable in recent quarters due to increased operating expenses related to selling the Telguard unit.

The company’s overall operation margins remain low at -8.7% for the past quarter, but have increased from -12.7% in FY 2006. A significant risk is that the company is transitioning from product sales to subscriber revenue for growth. The company might have to sell the Telguard units at a lower price in order to entice the residential market consumers to purchase the unit, which can result in shrinking margins. This may not be detrimental to Telular if it can convert the purchasers of Telguard into long-term subscribers. The FCP division may continue to lose money which may further harm operations as the company loses focus and invests in money losing lines of business.

Conclusion of Telular
Overall, Telular is a Buy because the Telguard subscriber base can provide a recurring cash flow that can be extremely valuable. Based on forecasted future subscription profit, the company appears to be undervalued. The main risk for this company is that a large subscriber base will not materialize; therefore subscriber growth should be carefully monitored as this may affect valuation of Telular.

Full Disclosure: I currently own WRLS and I came to all conclsusions independently.

This report was drafted in the summer of 2007.

*This material is not a recommendation of any particular security, is not based on any particular financial situation or need, and is not intended to replace the advice of a qualified attorney, tax advisor or investment professional.*

Sources Cited:
Yahoo Finance, Telular Corp. Retrieved July 9, 2007.
Telular Corp. 2006 Annual Report. Retrieved July 9, 2007.
Telular Corp. Investor Presentation, May 2007. Retrieved July 8, 2007.
Telular Conference Call. Q1 2007.

Want to see more reports like this? View my report on Audiovox!

Thursday, January 31, 2008

Audiovox (voxx) report from Summer of 2007

I wrote this report in the Summer of 2007 on Audiovox Corporation (ticker: voxx) for a job interview. Feel free to leave any suggestions.


Audiovox Corporation operates in the competitive electronics market, requiring constant innovation to maintain healthy margins. Audiovox has recently purchased OEHLBACH Kabel GmbH to promote expansion in international markets. However, the company is earning a low rate of return and it is unlikely that acquisitions will allow Audiovox to have sustainable growth. Furthermore, it can cut into the company’s cash reserves, which may decrease shareholder value. A Sell recommendation is suggested for Audiovox due to poor earnings and lack of future prospects.


Audiovox Corporation operates in the competitive consumer electronic market. The industry requires constant innovation to bring new and exciting products to market to maintain healthy margins. Larger companies can absorb a setback, while many of the smaller companies without brand awareness can have trouble surviving. Direct competitors of Audiovox include Sony, Panasonic, and JVC, most which are significantly larger than Audiovox (2006 Annual Report). Audiovox does not have significant brand name recognition compared to gorillas like Sony and Panasonic, but the company does have some consumer recognition.

Audiovox has several competitive advantages. Offering a wide variety of products allows Audiovox to diversify away risk to obtain a lower risk profile. The company has no fixed costs from manufacturing and therefore can avoid costly capital expenditures on failed projects. Also, the outsourced manufacturing of the company allows Audiovox to have lower costs in a weak macro-environment.

Market Outlook

Ultimately, this sector is driven by the consumer. The housing slump, sub prime woes, high gasoline prices, and slow GDP growth have cast a long shadow on consumer spending. Despite the negative news, the consumer has remained quite resilient as consumer spending rose an extremely healthy 4.2% and durable good purchases increased 8.7% in the first quarter. The expected return on the stocks should remain constant as long as interest rates hold steady. Audiovox’s size does not allow it to be the first to the market, but Audiovox still stands to benefit from their niche product offerings that can demand a premium because of lowered competition. Also, Audiovox can fill the void that large companies can create as they cater to the mass markets instead of working with products that can ring up only a few million in sales each year.


Audiovox has been looking toward the international markets to expand growth. Recently, Audiovox purchased OEHLBACH Kabel GmbH to help promote expansion in international markets. This is expected to help the company grow and drive new sales. Over time, operating margins should improve as costs due to the acquisition abate and Audiovox can streamline operations. Furthermore, the company is investing in supply chain management software and other business processes to improve performance (Q4 2006 Conference Call). Unfortunately, it does not appear as if these acquisitions and upgrades are enough for Audiovox to have sustainable growth. The recent expenditures may provide short-term growth in profits, but for continued growth the company is likely to need to derive profits through more large-scale capital intensive investments such as further acquisitions.

Current Earnings

Total revenue at Audiovox has recently decreased to $456,690 in FY 2007 from $539,716 in FY 2006, but gross profit margins increased from 11.5% to 17.4% when comparing FY 2007 to 2006. This highlights the company’s drive toward higher margin items. Audiovox’s operating loss decreased from $27.6 million in 2006 to $5.0 million in FY 2007. Overall, the company reached profitability for FY 2007 with income of $3 million due to income from its subsidiary. For Q1 in FY 2008, operating loss was $1.6 million mostly due to acquisition costs. The company was profitable during this quarter due to other sources of income.

Balance Sheet

The company’s balance sheet indicates a current ratio of above 5 meaning the company can easily withstand obligations to pay liabilities in the short term. The company carries very little long-term debt. The company is hanging on to excess liquid assets in the form of short-term investments. Based on its current earnings, the company should return the short term investments to shareholders as the main line of business does not seem to be very profitable and there is little evidence that the business can generate substantial profits in the long run.

At first, Audiovox appears to be overvalued with an earnings multiple of 98, but the balance sheet shows substantial value in the company. However, based on FY 2007, Audiovox has a book value per share of $17.5, which is much higher than the current stock price of $12.75/share. The tangible book value per share is closer to $14.3, which is still well above the current price per share. It is unlikely that the asset prices are incorrectly valued as much of the assets are made up of short-term current assets that are valued at a market price opposed to historical cost.

Future Prospects

The company can still remain valuable if the Audiovox does not continue to spend its cash reserves. Currently, Audiovox is earning a poor rate of return considering the capital it is using to generate its earnings, as the return on equity is extremely low. Also, Audiovox is continuing to acquire business and is using up its excess short-term assets. The best way to realize shareholder value might be to liquidate the company. At the current price/share the downside risk of the equity is limited, but based on the price history of Audiovox it appears as if the market will not likely recognize the intrinsic value of the firm. There may be barriers to liquidation or return of wealth to shareholders, which can prevent Audiovox from becoming fully valued. CEO, John J. Shalam “owns approximately 55% of the combined voting power of both classes of common stock. This will allow him to elect our Board of Directors and, in general, to determine the outcome of any other matter submitted to the stockholders for approval. Mr. Shalam’s voting power may have the effect of delaying or preventing a change in control of the Company” (Annual Report). Shalam may be holding onto the company for other reasons that do not include maximizing shareholder wealth.


To conclude, a Sell recommendation is suggested on Audiovox because of its poor future prospects and the low likelihood that the company will return the excess cash and short term investments to shareholders. As long as the company has significant current assets, the downside risk is limited. The company seems more interested in acquiring new lines of business, which may use up the surplus of short-term investments. To reiterate, the stock should be sold if currently owned and the proceeds should be invested at a higher rate of return.

Sources Cited:

  1. Audiovox Corp 2006 Annual Report. Retrieved July 9, 2007.

  2. Yahoo Finance, Audiovox Corp. Retrieved July 9, 11, 2007.

  3. Google Finance, Q4 2006 Conference Call. Retrieved July 9, 2007.

don't sue me: This material is not a recommendation of any particular security, is not based on any particular financial situation or need, and is not intended to replace the advice of a qualified attorney, tax advisor or investment professional.

Monday, January 21, 2008

Who can save us from a Recession? Ron Paul?

It appears as if we are in a recession. (Yes I used used the R word). Of course we need two
consecutive quarters for it to be declared an official recession. By they
time they declare that we are in a recession let's hope that we are out of the
recession. Consumer spending has slowed and financial markets have yet to
find solid ground. It looks like we can blame the Federal Reserve for some
of our financial pain for keeping interest rates artificially low for way to
long. Whenever Alan Greenspan faced a problem he would solve it by
lowering rates. This has led to the huge housing bubble that can take
years to stabilize. With rising real estate prices consumers had a false
sense of wealth due to the double digit increase in their home equity. In
effecting they were borrowing against their home equity which can also explain
why the savings rate is so low. The dollar has been crippled when compared
to the Euro or Loonie. Crude prices have risen faster in dollars than in Euros.

So every candidate running now has come up with a plan to solve our nations
woes. The democrats favor deficit spending and the republicans favor tax
relief but continued government spending. The only candidate who has the
right plan is Ron Paul. He wants
to eliminate the IRS and therefore grind the federal bureaucracy to a halt.
Just think of the instant savings we would have. Since the start of the
debates Ron Paul has been the only politician concerned with the economy.
Dr. Paul clearly understands the beauty of the free market. He even wants
to go on the gold standard to protect the integrity of our money supply and
fight inflation. Had we been on the gold standard the fed would not
have been able to manipulate the housing market and create this asset bubble.

Does Ron Paul have a chance? Not in this election because the
mainstream media only ignores him. Also he does not have charisma, but he
is a great educator. The good news is that he is really educating the
younger generation of Americans who are becoming more involved in politics.
He came in 2nd place in Nevada on Saturday and I would love to continue to see
people with likeminded ideas ban together. It is truly amazing what the
Ron Paul Revolution has accomplished in just a few weeks.