FaceBook's share drop and CA state budget

FaceBook's decline in share prices caught the state of California "counting their chickens" too early...

Fox Business reports:

California was counting on $1.5 billion in tax revenue through June because of Facebook’s (FB: 19.51, +0.07, +0.36%) initial public offering. It’s also counting on another $400 million in new sales tax revenue and new tax hikes on the rich.

But the state is now scrambling because it got hypnotized and overstated by a factor of nearly 50% the amount of capital gains tax revenue that it thought was coming in from the Facebook IPO. Based on Facebook’s latest share price, the state is on track to get just $707 million, 47% less than what it projected.

Read more: http://www.foxbusiness.com/investing/2012/08/02/plunge-in-facebook-shares-has-california-seeing-red/?intcmp=obnetwork#ixzz24U9tjezB

On Rambus

Here are some meaty tidbits about Rambus with respect to Micron and their AT (Anti-Trust) lawsuit.

"...investors are waiting to hear the verdict and damages in the case Rambus (Nasdaq:RMBS) has brought against Micron. Whatever the merits of the Rambus case, the reality is that other players (Samsung and Infineon) have chosen to settle with Rambus and there seems to be an expectation that Micron is going to be found liable at least to some extent. The question, then, is how much of the potentially $14 billion in damages that Rambus wants will the company actually get (and how will it be split with co-defendant Hynix)? As Micron has about $10 billion in shareholder equity, this isn't a small issue. 

The Bottom Line

Crippling Micron isn't going to get Rambus what it wants or needs (which is money), and neither will pushing the company into bankruptcy. Still, there is a real risk that Micron could be on the hook for quite a lot of money to be paid out over quite a long time. Micron will almost assuredly appeal an adverse verdict, but this is a large potential liability that is difficult for would-be investors to accurate discount and factor into their models." 

Read more: http://stocks.investopedia.com/stock-analysis/2011/Microns-Persistence-Of-Memory-MU-HPQ-DELL-SNDK-RIMM-NOK-RMBS1004.aspx?partner=YahooSA#ixzz1ZupTyAiY

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With all of the activity in the stock, here is a link to see up-to-the-second bid-asks (thanks to EssexElectric at InvestorVillage).

http://www.batstrading.com/book/RMBS/

Nice write-up by 3rd party on RMBS

One of the "flyers" we have mentioned has been in the news recently. Here is a good write-up from a 3rd party:

http://streetauthority.com/news/thursday-losers-monsanto-rambus-and-education-management-456126

Legal Delays Hit Rambus

Shares of memory chip maker Rambus (Nasdaq: RMBS) are off -8% today on word that the International Trade Commission (ITC) will delay a decision on whether Nvidia (Nasdaq: NVDA) and others violated Rambus’ patents. Rambus, along with Qualcomm (Nasdaq: QCOM), has made its name as a collector of royalties for the massive base of intellectual property it has developed. Before the delay, shares of Rambus had been near a multi-year high on expectations of an imminent positive resolution to the matter. Yet this is more of a delay then a real setback, as the ITC simply wants all parties to weigh in on how a royalty deal between Samsung and Rambus will affect the rest of the industry.

Rambus has always been a difficult stock to value. Much of its profits come from royalties, and the timing of agreements creates very lumpy revenue and profit results. The company was especially active in securing new agreements in the middle of the last decade, which pushed shares above $40 in 2006. Royalty revenue slumped in more recent years, and shares now trade closer to $25.

Action to Take --> Over the near-term, shares should rebound and push past the $30 mark, perhaps closer to $35. That’s because the company is expected to imminently win a patent case over memory makers Hynix and Micron Semiconductor (NYSE: MU), which could net the company close to $500 million in an upfront license, and then more revenue from ongoing royalties. After that, perhaps by the end of July, the company is still expected to prevail in the case that was just delayed by the ITC. That could net the company a similar windfall.

Snippets from Barrons article on RMBS

Thanks to InvestorVillage posters, here are some snippets from today's article in Barrons on RMBS:

"So far, results have been mixed, even when Rambus (ticker: RMBS) ostensibly wins. A major settlement with Samsung Electronics (SSNGY) came in far below expectations. Yet Rambus boasts a $2.9 billion stock-market value, based largely on bulls' bet that its $12 billion lawsuit against Micron Technology (MU) and Hynix Semiconductor will succeed, producing a rich reward." (snip)

"Optimistic analysts say a victory could help propel the stock, recently around 25, up to 50." (snip)

(Reflecting the Micron/Hynix case) "If the court finds in its favor, the damages would be tripled to roughly $13 billion. Bulls deduct taxes from that result, divide it by Rambus' 117.5 million shares outstanding to determine that the company will enjoy a $66-per-share windfall." (snip)

(Reflecting on Samsung's settlement for $900 million), "If Hynix, based in Korea, and Micron, based in Boise, Idaho, settle for $900 million each, that would lead to a total of $1.8 billion, which after taxes shrinks to $1.1 billion, or $9 a share."

Stock Flyers

From time to time, we talk about individual stocks as "flyers." These are relatively high-risk stocks that have good potential, but correspondingly high risk. We've discussed Rambus in some of our "stock flyer" posts.

We still think that RMBS has good potential. Their deal with Samsung should put a floor under the share price. In addition, it is likely that new licenses and/or agreements will be signed over the next few months. The risk/return part of the RMBS equation has changed so that it is slightly safer now -- but the upside is also not as outrageously high at these levels.

Some new flyers that we like include CYCC and NNVC. These are both biopharm-researchers that are high risk/high potential. Use only very risky capital.

RMBS (probabilities)

The good news is that RMBS's share price is holding up relatively well given yet another (slight) delay. RMBS's antitrust case against the "cartel" was set to start earlier in the week -- and surprise (!!) -- at the last second, we learn that one of the cartel lawyers is very sick. Here's Bloomberg's blurb on Rambus.

Note that this isn't much of a surprise because the same thing happened just a few months ago! Back then, Rambus' case was delayed due to the health of a cartel lawyer -- which pushed the trial closer to the holidays -- so the court decided to postpone the case until early January. This time, the judge delayed things for eight days to decide what to do next...

A few notes on Rambus:

• Based on the reaction of the share price, we feel that Rambus is holding up fairly well.
• Overall, we believe the price hanging tight at 20-21 is "good news" because on a "contrarian" level, the level of negativity by longer-term RMBS shareholders seems to be on the high end. That is, with all of the negativity, for RMBS to go from 23-24 down to 20-21 is a good sign.
• On the other hand, some RMBS investors and regular message board "posters" have said that "not much has changed" -- and that people need to hang tight and await the "reward."
• We are overall happy that the share price is hanging tough with the slight delay and negativity. In fact, this level in the 20-21 range will hopefully develop into long-term support in the future.

What does the market say? We used a "back of the envelope" method to value/price a few scenarios that include the range of possibilities (including solid business solution, and bad conclusions for Rambus). We wanted to estimate the probabilities that the market is pricing in -- for various scenarios in RMBS's future. What do the numbers say?

• Several months ago, Rambus was hovering in the mid-teens. At this stock price, the market was signaling about a 20% chance of a good conclusion/business solution for RMBS.
• When the stock was hovering at about 24, just below resistance in the 24.5 to 26 range, this percentage was more like 40%
• Since the mini-delay -- as we await the judge's decision next Thursday, the stock has dropped to the 21 range -- and the percentage has dropped correspondingly to about 35%.

The price action seems to make some sense -- and we hope that justice will be served -- sooner rather than later. We continue to believe that Rambus has good potential as a "flyer" for aggressive investors -- and most "longs" will agree that they are happier at 21 than they were at 16.

Rambus (RMBS) moving to 52-wk highs

In some previous blog posts, we have mentioned Rambus (ticker RMBS) as a flyer that has a lot of risk -- but correspondingly high potential rewards. Very high potential...

Currently, there is a "perfect storm" of news out there -- each of which has the potential to launch RMBS to much higher levels. These include:

• EU settlement with RMBS should be finalized at any moment. Although the specified royalty rates are lower than Rambus might have hoped for -- the agreement will legitimize RMBS intellectual property and potentially pave the way for licenses with some big firms. There have been rumors that some big names (like Apple!) could sign up as licensees.
• The AT trial in Judge Kramer's Court is scheduled for Jan 11 -- and if all stays on target, as the days tick by, the marketplace will have their eye on a payoff that has been estimated in the billions of dollars (from several billion dollars to double-digit billions).
• Whyte's Court also has proceedings that are scheduled this week.

There are, of course, risks of delays and other setbacks. For now, however, the market action looks like we could break out to the upside. Here is a look at some resistance levels that may be of interest to investors:

• A close above 19.42 would be bullish.
• The next level of resistance would be the 23-25 range.
• Next resistance level is the 35-42 range.
• And then, dare we say... triple-digits!

From Previous Blog Posts

Rambus is involved in patent litigation (ugh) -- but seems to be winning the war and getting over the hump in terms of risk. Note, however, that I thought this to be the case back in January, when the stock was a bit higher. In early January, things seemed to be going RMBS's way and the stock was trending higher to around 18. Rambus got blind-sided by a court in Delaware (which some feel will be overturned) and the stock cratered to the single-digits.

However, Rambus has continued to make progress in other venues and has been edging upwards again. The stock is building a base at around 10 -- and as a trader, the stock chart is looking favorable. Rambus certainly has a lot of risk and volatility surrounding it -- but it is certainly a "flyer." It has the potential to easily move up to a multiple of its current price -- with some predicting triple digits.

You can find more information at www.rambus.org, forums at www.investorvillage.com and www.yahoo.com (lot of noise at forums) and www.rambus.com.

RMBS -- update

Back in April, we mentioned a high-return, high-risk "flyer" named Rambus.

http://z-trader.blogspot.com/2009/04/rmbs-flyer.html

As we stated, we like having a few "flyers" in our portfolio that have the potential for huge gains.

Rambus is involved in patent and anti-trust litigation (with Memory Manufacturers [MM]) that could bring in billions of dollars in damages and ongoing royalties -- or could wring the company dry. Since we mentioned the stock in April, the stock has moved up steadily from around 10 (after bottoming at around 5 and 7 in Nov 08 and Feb 09 respectively) to the high teens.

The stock hit recent highs of around 19.5 as the anti-trust suit scheduled for the end of Sept 2009 neared. This date has now been postponed to Jan 2010 due to the illness of a MM attorney. The delay caused the stock to move from the 19 range down to the 15's. However, due to the strange circumstances surrounding the delay, there is chatter that other things are going on "behind the scenes." While this remains to be seen, the drop to the 15's indicates increased uncertainty, but not "horrible" news.

We continue to see RMBS as a high potential flyer -- with associated risk. As litigation moves forward, and with the stock recently penetrating upside resistance at 19.1, we see the stock moving back to the high teens --- and into the 20's barring other unforeseen obstacles. Next upside resistance levels include 26 and mid-40's (!!) -- nice gains from the current 15 price range.

Traders may want to see a base form before buying RMBS.

Alcoa and Nokia

We usually focus on a macro-portfolio of stocks, bonds, currencies and commodities around the globe, but we love finance -- and sometimes talk about individual stocks with friends and family. Here's our take on two stocks that have come up recently in various places:

I have followed Alcoa for a while and still like it a bit. As an "industrial play," it could be solid. Also -- once things calm down (economy!) -- Alcoa could potentially be bought out.

I have also followed Nokia for a while... Nokia is a huge brand name and often shows up in "stock filters" (for both value and growth). One "filter" I believe is from a Mensa investing board/group that I have seen.

RMBS -- a flyer?

Although we focus more on trading the futures markets, we also talk to friends and family about asset allocation, mutual funds, and individual stocks. From time to time, we'll post information on these areas (such as prudent asset allocation) on our blog.

In this post, we want to discuss "flyers." We sometimes like to take a small amount of our portfolios and invest in a "flyer." A "flyer" is an investment that has a fair amount of risk -- but also has huge upside. We wanted to mention a company that we have been following called Rambus (ticker RMBS). Rambus owns many patents in computer chip interface and system design -- and is trying to collect licensing / damages for their patents.

Rambus is involved in patent litigation (ugh) -- but seems to be winning the war and getting over the hump in terms of risk. Note, however, that I thought this to be the case back in January, when the stock was a bit higher. In early January, things seemed to be going RMBS's way and the stock was trending higher to around 18. Rambus got blind-sided by a court in Delaware (which some feel will be overturned) and the stock cratered to the single-digits.

However, Rambus has continued to make progress in other venues and has been edging upwards again. The stock is building a base at around 10 -- and as a trader, the stock chart is looking favorable. Rambus certainly has a lot of risk and volatility surrounding it -- but it is certainly a "flyer." It has the potential to easily move up to a multiple of its current price -- with some predicting triple digits.

You can find more information at www.rambus.org, forums at www.investorvillage.com and www.yahoo.com (lot of noise at forums) and www.rambus.com.

Please let us know what you think -- and what other "flyers" you like.