Superbowl Commercial Stock Returns

Companies that advertised during the Superbowl last week... I knew this was ridiculous while compiling. I Guess I needed to satisfy that curiosity.

EBAY

Thoughts on investing in EBAY stock:
First, Ebay has been a large growth company for some years. From 1998 through 2005 EBAY traded at anywhere between 1500 and 50x earnings, 33.8 in 06', 28.4 in '07 and now a meager 9.3x this year's expected $1.56 per share. We are three quarters into 2008 earnings and have tallied 1.17 per share in the first 3 quarters. We should be able to hit the required .397 in Q4. Such a figure would still be lower than Q's 2 and 3 and 2 pennies lower than last year.

This year, Ebay has a broader product offering including Skype, better integrated PayPal, Stub Hub and Bill me Later, among others.

These offerings, along with an ~ 35% increase in listings will have to offset the 10% decrease in YoY unique visitors to the auction site and a whopping 25% decrease in total traffic. This is the main problem - a fundamental issue relating to its operations, its appeal and its model in the future.

2008 was actually the first year that other auction sites finally were able to attract buyers. Some revolt among the old-guard of Ebay sellers vis a vis new policies on the Bay (new listing fee structure, new rules about shipping fees and new seller rating systems) and disenchantment with new CEO John Donahoe contributed to the fundamental ops problems as well.

A sum-of-parts valuation may imply Ebay is selling for about what it is worth - applying a 1B valuation to Skype, 7x Ebitda for the marketing business (growing at a 10% clip) and 8x for the payments business (growing at a 25% clip) leaves about 5x for the marketplace. (7 x 788 * 55% = 3.05B) + (8x 1836 *33% = 605M) + (5 x 4,838 *44% = 10.64B) + Skype = Total of 15.24B

Ebay has net cash of about 3.3B for an EV of (18,719-3,300) 15.4 B

I believe that while this may seem to be a compelling value in times of expanded multiples and risk taking, right now, with Ebay's main marketplace business growth slowing to a near halt, with fundamentals, in my opinion, impaired, I think Ebay is fully valued right here at 14.

S&P 500 Compounded Annual Growth Rates

The following chart shows the compounded annual growth rates of or investments in the S&P 500 for the past 14 years.

The S&P 500 closed at 459 at the end of 1994. Buying at the end of 1994 and holding through the recent turmoil would yield a CAGR of 5%, 14 years later. Not too bad.

Consider however, buying anytime after 1994. Buying at the end of 1995 would have just kept your principal intact after adjusting for inflation. Buying in any subsequent year would have eroded your principal.

I believe that we are getting close to a very safe, very comfortable buying opportunity for long term investors.

Tish'a B'Av and the Stock Market

Tish'a B'Av falls on Saturdays, Sundays, Tuesdays and Thursdays.

Calculating stock market returns for the past 40 years on that day, the same $1 invested every year at the close of the evening prior and pulled out at the end of the day on the 9th of Av, would have turned into $.93656 at the end of 40 years.

The average Tuesday return has been .034% and the average Thursday return has been .025% (including Tish'a B'Av) for the past 45 years. (courtesy of http://techfarm.blogspot.com), while the average Tish'a B'Av return has been -.269% over the past 40.

I dont know what the St Dev has been, nor do I know if Tuesday/ Thursday returns have been different over the past 40 years than the past years. So this is just meant to be fun and a drop interesting and not significant.

Maybe we are lucky that the ninth of Av falls on an open stock market day only 6 out of every 10 years.

Fun with Charts: Stock Market 1929 - 1942 vs. 2000 - 2013

Not the first, Im sure, to compare the two, but interesting parallels.

Initial fall from the peak.

• The S&P, or whatever Bloomberg includes in the S&P from 1929 (possibly the entire market back then) peaked at close to $32 on September 16 1929. The market then fell for 33 months to $4.40, a drop of ~86%.

• QQQQ, the largest 100 companies on the NASDAQ, peaked at about 117 on March 27 2000. The market then fell for 31 months to $20.06, a drop of ~83%.

2. Long Recovery to next peak

• It took 57 months for the S&P to reach its next peak, in March 1937, for a gain of 324%
• It took 60 months for the QQQQ to reach its next peak, in October 2007, for a gain of 173%

3. Fall

• From the next peak of 18.67 in March of 1937, the market fell 54% in 12 months and bottomed on March 31 1938 at 8.5

• From our peak (QQQQ) in October 2007, we have fallen 41% in 12 months