Monster: Threats from Economic Uncertainty and Social Media Rivals

A San Francisco portfolio manager recommended a short on Monster Worldwide (NYSE: MWW, $13.50). The company's business is of highly cyclical nature and the recent deterioration in economic indicators doesn't bode well for MWW's prospects. Monster has been losing share consistently in the online employment solutions space to CareerBuilder and has also seen its position challenged by a number of social media competitors, with LinkedIn presenting the biggest threat. Niche sites with better focus on specific industries like DICE are preferred by recruiters looking for better qualified candidates. Based on projected earnings and multiples for companies in related industries and with similar financial performance, the upside for the short is 40%+.

Roulston Energy Partner Steve Maloney on IEA's Decision to Release 60 Million Barrels of Oil

IEA's decision to release 60 million barrels of oil, ostensibly to offset "Libyan supply disruptions", is a commodity-denominated analgesic to take the sting out of the end of Fed QE2 debt monetization. The US tranche is less than 5% of the Strategic Petroleum Reserve. All in, the supply add is about a day of demand, eadily sopped up by Chinese and Japanese shortages.

Much has been made of the fact the US tapped the SPR under catastrophic conditions: war (the Gulf War) and Katrina. For many investors, the end of QE2 and the market's retreat is just such a catastrophe. So are fallong poll numbers.

But QE2 has been a false friend. We have a weakened dollar, propped up by a weaker euro, and put commodities on the offensive. Political draws of this kind are merely a rear guard action.

The question going forward is to what extent IEA/SPR becomes a second front for QE advocates as the Fed retreats. This equities sugar high can become an addiction if grown-ups fail to step in.




Stephen Maloney is a partner at Azuolas Risk Advisors with over 30 years experience in the US and EU modeling risk and valuation in energy, FX, and other commoditites. His clients include companies, hedge funds, and financial institutions actively marketing or trading physical and financial commodities and derivatives.

Roulston Media Partner Mark Ramsey on the Problems with Traditional Radio's Business Model

Roulston Research’s Media Partner Mark Ramsey recently created a blog posting discussing how the challenges traditional radio faces today are a result of it's business model. Traditional broadcast radio has always been focused on ratings being the key measure of success in the industry but an increasing amount of its competitors don’t focus on ratings at all. Mark states, “Radio is constrained by a model that rewards broadcast licenses with agency dollars but invites radio’s competitors to compete for everything else and even for the growing fraction of agency dollars transferred out of advertising and into marketing.”

Mark believes that control is moving more and more toward the consumer and broadcasters need to focus on providing content where consumers want it and monetize on that relationship. Fans will find content that they are interested in wherever it is located even if it is not local. Therefore, broadcasters should not delay or get rid of podcasts and provide more streaming content on their website to better meet the needs of consumers otherwise other competitors will take advantage of their lack of exposure in this space. He cites Apple as a perfect example when they introduced the iPhone even though they knew it would cannibalize some of the iPod’s market because if they didn’t someone else would have. You can read Mark’s full article on how he thinks traditional broadcast radio needs to adapt their business model at http://www.markramseymedia.com/2011/06/the-problem-is-radios-business-model/



Mark Ramsey Media is one of the best-known research and strategy providers to media companies in America. He has worked with several television and innumerable radio broadcasters over his career, including all the biggest names, from Clear Channel, CBS, Bonneville, Sirius XM, and Greater Media in the US to Corus and Astral Media in Canada. Clients from outside broadcasting have included EA Sports and Apple.

National Cinemedia: Network Effect and Rising CPM's Point to Upside

A San Francisco presenter recommended National Cinemedia (NASDAQ: NCMI, $16.36) as a Buy. The company runs a nationwide cinema advertising network and has the leading market share in a rational duopoly with privately-held Screenvision. NCMI has 27-year exclusive contracts with the three largest movie chains in North America, which have founded the company and retain a combined 52% share in it, and the dominant presence in the metropolitan areas with the best demographics. CPM's in movie advertising are currently double the prime time TV rates due to much higher recall rates for movie ads and better targeting capabilities, but will move higher as the domestic industry matures. As National Cinemedia adds more independent operators coupled with consolidation by the three chains, the network effect will continue to strengthen, bringing in more and more advertisers. The company is sacrificing short-term growth in CPM's by going after large CPG accounts, but in the long-term higher utilization will more than make up for it. The presenter's target is $30 by 2014, or almost a double from where the stock is trading now.

Highlights from Legacy Vs. Social Media Roundtable

At our Legacy Vs. Social Media Roundtable last week former Clear Channel exec Jim Meltzer focused on the future of radio content. While Pandora and satellite radio have taken market share and offered new options the increased needs for advertising revenue on satellite is more challenged by Pandora’s model and there seems to be a limited shelf life for the sustainability of the model. Radio still controls certain channels in advertising as well as local market content distribution. The more radio leverages their local market advertising advantage and the ongoing need of local weather, news, entertainment and other content they have a foothold that can be expanded. The problem is that industry financial and corporate driven non local content (franchising programming in particular) has limited further growth. Could they team sales with national partners in search and couponing? There are creative new paradigms that CBS and some larger players somewhat seem to understand but new paradigms could be very opportunistic.

Larry Cornett formerly of Yahoo talked on search and Google’s opportunity for growth. From couponing to advertising the discussion highlighted the many alternatives that Google has positioned and can leverage versus the models from Facebook to Groupon. As the revenue and content mix moves more to advertising the challenge of balance is a potential threat. At the same time Larry discussed the switch of advertisers to online resources and the substantial future opportunities still ahead. Measurement capability, behavior and location tools are some of the overwhelming advantages. As mobile grows the top and bottom line expansion in the space is still a market size unknown and search internationally is still worthy of premium growth expectations.


Jim Meltzer is the principal of Meltzer Media Management, a broadcast management, sales, internet and organizational firm founded in August 2008. Mr. Meltzer was previously a Vice President and General Manager at CBS Radio. Prior to that, he was a Regional Vice President at Clear Channel Communications.

Larry Cornett is the founder and principal of Brillant FORGE which provides Product and Design Strategy and Management Consulting services to Fortune 500 companies and startups. Prior to founding Brilliant FORGE, Larry was the Vice President of Consumer Products for Yahoo! Search, leading a multinational team of product managers, designers and developers who were focused on creating world-class Search experiences to compete with Google and Bing.

Highlights from the Wireless and Mobile Device Roundtable

At our Wireless and Mobile Device Roundtable Ross Rubin and Craig Mathias discussed the capacity issue of 3G for the next few years. Continued technology improvements will allow some capacity growth but tiered and priority pricing seem inevitable. Over the next 3-5 years unlimited data plans will be replaced with offloading and other incentive pricing tools by all the players. Microsoft's recent decisions with Nokia and Skype were questioned in detail and when pushed Ross Rubin of NPD gave Microsoft technology a three year window to work with Nokia before significant risk to both companies. It was felt Nokia took a bigger risk not looking at Android as an option and that may come back to haunt them while for Microsoft the partnership seems to have less risk.

Ross Rubin is Director of Industry Analysis for The NPD Group while Craig Mathias is Principal at the Farpoint Group.

Roulston Healthcare Partner Randy Vogenberg on whether Employers will Abandon Health Care Plan Coverage Under Obamacare

The consulting firm McKinsey & Company was thrust into the political spotlight Tuesday after it published a study finding that, once fully implemented, the health care reform law will drive huge numbers of employers to drop or dramatically restructure their companies' health care benefits.

According to McKinsey this survey was not done by their healthcare group or senior consultants and is at odds with prior surveys, expert consensus, and experience from the only state - MA - where ~5 years after universal care has been in-place, 78% of employers provide healthcare vs. 70% before, highest in the nation. This link shows how embarrassed McKinsey is about this: http://tpmdc.talkingpointsmemo.com/2011/06/multiple-sources-throw-controversial-mckinsey-health-care-study-under-the-bus.php#more.

Unlike most surveys McKinsey refuses to release the details of the survey participants and the survey methodology which makes it even more suspect: http://www.plansponsor.com/Despite_Anticipated_Costs_Most_Employers_to_Keep_Health_Care_Benefits.aspx

The recently released IFEBP (International Foundation of Employee Benefit Plans, WI) survey on the same topic, if employers will drop out of coverage, is here: The message is that many unknowns remain in health care owing from the stalled implementation of health reform, and each stakeholder or influencer continues to be engaged in posturing whilst incremental decisions are being made. It also shows that published surveys from any source can not only be flawed or not but create an immediate firestorm causing a retreat to safe ground once again.


Randy Vogenberg is principal at the Institute for Integrated Healthcare which offers health care and employer based benefits strategic consulting, value based benefit plans and design, pharmaceutical, diagnostic & device industry training, advising on managed customer linkages, and health policy and applied economic issues analyses for benefit design solution opportunities in the health care marketplace. He also principal of Bentelligence which provides a 360 degree view of benefits advisors, health plans and employer plan sponsors. It is a web based market intelligence tool and expert support for all stakeholders in health care. In addition, Randy recently wrote a book called Pharmacy Benefits that addresses benefit plan design, the selection of a pharmacy benefits manager and pharmacy network, compliance, specialty pharmacy, and cost-saving strategies which you can purchase at www.ifebp.org/pharmacy.

Roulston Transportation Partner on How Higher Oil Prices Have Affected the Rail and Trucking Industries

Roulston Research Transportation Partner McKee Stewart Jr. gave his take on how higher fuel prices have affected the railroad and trucking industries. He expalined, "With the recent run up in fuel prices the great “Road vs. Rail” debate is being rekindled. Over the course of the last year, national average highway diesel fuel prices have increased by roughly 35%. For a truckload or full container shipment, add on fuel surcharges can increase the costs of transportation by 40 – 50%, depending on the carrier, the mode, and the economic clout of the shipper to negotiate rates. Combined with the recession, shippers are looking to cut transportation costs wherever practicable.

From a shipper’s perspective, there are obvious issues that drive the choice of transportation mode, including service / transit time requirements, the quantity and nature of the goods to be shipped, cost drivers such as distance to and from the railhead, the overall distance that the shipment needs to move. As overall distance increases, rail becomes much more competitive against trucking based on the inherent efficiency associated with its advantage of low fuel consumption per ton mile.

The real question isn’t train vs. truck, it’s about how and when intermodal moves make sense. Rail carriers have been improving service, and have cost advantages over trucks. Combined with the trucking industry capacity issues revolving around driver retention and hours of service, intermodal will continue to gain share, especially in the 1,500 mile length of haul category.

These trends clearly benefit the railroads, particularly the Class I group of carriers like Burlington Northern Santa Fe (a Berkshire Hathaway company), Union Pacific, CSX, and Norfolk Southern. However, on the trucker’s side, rail can be a very helpful partner. Long haul carriers like JB Hunt, Schneider, Werner, ABF, Con-Way, FedEx and UPS generate enough loads to get favorable rates, have over the road options to hold their rail vendor costs down, and have extensive relationships with small and medium shippers that historically haven’t had much negotiating clout with the railroads.

Over the long term, as intermodal transport continues to gain share, the ‘hidden’ beneficiaries may well turn out to be regional carriers such as Con-Way. The more obvious beneficiary to the increasingly complicated supply chain may well turn out to be third party logistics companies like CH Robinson."



McKee Stewart is founder and Principal of Stewart Management Systems LLC which is a consulting practice focused on Financial Planning and Analysis, Yield Management, and Business Intelligence. He previously worked for over 20 years with Roadway Express in a variety of Senior Level Positions.

Roulston Healthcare Partner Ed Berger on How Healthcare Reform Politics Shouldn’t Affect Investment Opportunities or Strategy

The long debate over, and eventual passage of, healthcare reform fostered a vibrant cottage industry devoted to identifying the potential winners and losers that would result from the legislation. It seemed a foregone conclusion that a policy initiative of such ambition and scope would create new business and investment opportunities while simultaneously deflating the prospects of some established enterprises. The fact that no such dramatic affects have yet been observed might of course be attributed to the legislation’s long implementation timeline – we are still, for example, a long way from the state health exchanges and broad coverage mandate that were and remain the focal point for the reform debate. And the prospects for implementation of those and other elements of the reform bill have been thrown into question by the apparent commitment of the House Republican majority to either repeal major elements of the initiative or deny the funding they require. Two questions remain for investors: “Does the reform legislation as it stands really create new winners and losers?” and “Should investment strategy be predicated upon expectations concerning the success of efforts to repeal or frustrate implementation of reform?”

I’d answer “No”, fairly resoundingly, to both questions. Worry about the investment strategy impact of the politics of healthcare reform is as overheated and futile as the political debate itself. Step back from the political rhetoric for a moment and consider what the healthcare reform bill really entails:

1. At full implementation, it mandates that (almost) everyone buy health insurance, or pay a penalty for failing to buy insurance;

2. It regulates insurance company business practices;

3. It creates mechanisms, through expansion of Medicaid and creation of state insurance exchanges, to provide insurance to individuals and families that can’t afford it in the current market;

4. It (partially) pays for increased public subsidies through a variety of Medicare cost control measures;

5. It mandates broader implementation of electronic medical records and related health information technology ((HIT) tools;

6. It funds an ambitious comparative effectiveness research (CER) initiative;

7. It enables a broader program of Medicare alternative payment demonstration projects, most specifically and notably trials of accountable care organizations (ACOs) as a model for implementing incentives to control costs while improving quality.

Healthcare reform “works” – i.e. achieves the cost control and quality improvement goals its advocates seek – if and only if near-universal insurance coverage is accompanied by altered provider incentives (such as those posited for ACOs) and the more efficient use of resources enabled by CER and HIT. But the important thing for investors to understand is that the movement toward CER, HIT and ACOs predates the passage of reform, and that repeal of reform might slow, but would certainly not stop, that movement.

The insurance companies that adapt most effectively to their regulatory environment, and to the pressures to control costs, will flourish at the expense of those that do not. Companies that improve healthcare data access and management are advantaged in the evolving marketplace. Medical technologies and/or therapeutics to improve clinical outcomes will be good investments, and those that do so while reducing costs will be the best of those investments. Provider organizations that effectively address the structural, managerial and care delivery issues that will allow ACOs to succeed will flourish at the expense of those that do not. And it is a good bet that all of these things would have been true absent healthcare reform, and will remain true regardless of the near term political debate.


Dr. Edward Berger, has more than 25 years of experience working in senior management or as a consultant with medical device, biotechnology and health services companies, dealing with problems at the intersection of U.S. and international health care policy, corporate strategy development, and strategically sensitive corporate communications with government, investors and the media. He is the founder and principal of Larchmont Strategic Advisors which helps life sciences companies create and implement integrated strategies to address the many policy and regulatory obstacles and opportunities they face in their efforts to secure public and private insurer coverage and optimal reimbursement for new or evolving technologies.

Details from June 8th Retail Roundtable Event with Roulston Retail Partner Arnie Cohen

In our Consumer Roundtable Arnie Cohen discussed cotton prices reaching their peak two months ago. Companies seem to have a better handle on this and labor prices since the holiday season while freight costs continue to be a burden. Look for possible new cotton sourcing out of Africa. The differentiating stickiness in retail continues to drive Arnie’s views on those who are growing. Pricing isssues are impacting primarily lower end markets in a trifurcated market. Higher end retailers are able to maintain much of their margin as price elasticity is tied to stickiness of customer and more unique product mix where customer is more accepting of price change with style change. Trends and traffic are consistent at that end of the market.

The lower end is struggling with both pricing and traffic and changed consumer behavior. Unemployment, big box challenges and dollar store models are all impacted by both demographic changes and margin pressures. Arnie sees JCrew men’s trends stronger and he feels the company seems to have regained in women’s from a dismal holiday. Urban, maybe after to many risks at Holiday seems to have regained some touch. Some companies continue to be out of touch with who is their core customer while others are still challenged. Abercrombie seems to be having traffic and product challenges. PVH was cited as improving recent trends from management decisions and consistent execution. The group discussed Macy’s where Arnie continues to have concerns with Vendor issues and treatment of the 60% of branded product where the best innovators increasingly are treated roughly and Macy’s leverage in this space and leverage pushed on suppliers may have longer term repercussions. Target has missed on the fashion trends but Arnie still has a positive impression if they can get their handle on pricing.



Mr. Cohen has spent the 27 years immersed in the retail and consumer direct industry. He has held a variety of senior executive positions with Gucci, J. Crew, Macy’s, American Eagle and others, incubating, leading and fixing brands and distribution platforms both domestically and abroad. Arnold is well known as one of the top merchandisers in the industry, both in the US and overseas

Roulston Technology Partner Keith Mallinson on the Proposed Acquisition of T-Mobile USA by ATT

Much of the debate on the proposed acquisition of T-Mobile USA by AT&T is about what antitrust lawyers and economists call horizontal competition issues among wireless carriers. What choice do consumers have: how many wireless carriers are competing locally, nationwide and how will this affect prices for basic services in voice minutes, texts and megabytes of data? Until quite recently in the last couple of years, vertical issues—in supply chain competition between carriers and their handset vendors, operating system suppliers and applications providers—have never figured much in discussions on telecom carrier mergers, despite the fact that major US wireless carriers wielded significant control over their supply ecosystems.

It is a very different competitive landscape today with the balance of power flipping over. Apple has an increasingly strong competitive position versus carriers on the one side, and with mobile applications developers and content providers on the other. The iPhone company is extracting a lion’s share of total ecosystem profits. Similarly, Google with its increasingly popular Android operating system and ecosystem, is also a powerful competitive counterbalance to the aspirations of wireless carriers in value-added offerings above and beyond connectivity services.

Such is the increasing vertical competition from Apple, Google and over-the-top providers such as Skype, with wireless carriers increasingly dependent on efficiency-based competition in commoditized connectivity services, there is increasing justification to allow smaller and insufficiently profitable players, such as T-Mobile USA, to be acquired. The increased heft of combined carriers, such as an even larger AT&T, would be a more effective foil to the rising might of these others. The Wall St Journal has recently reported that the Justice Department has concerns about Apple as a prospective purchaser of patents, including those for wireless technologies, from bankrupt Nortel. Google is under antitrust investigations in Europe. Forcing continued uneconomic fragmentation upon wireless carriers will imbalance competition across the broader ecosystem.


Keith Mallinson is founder of WiseHarbor, providing expert commercial advisory to technology and services businesses in wired and wireless telecommunications, media and entertainment serving consumer and professional markets. He is also regular columnist with Wireless Week, FierceWireless Europe, and IP Finance. Prior to forming Wise Harbor Mallinson led Yankee Group's global Wireless/Mobile research and consulting team as Executive Vice President. He currently forecasts the long-term outlook in mobile operator services, network equipment and devices to 2025 which is available to purchase on his website at http://wiseharbor.com/forecast.htmlhttp://wiseharbor.com/forecast.html

Roulston Technology Partner on Fallout from Recent Data Breaches

Roulston Technology Partner Bart Perkins recently wrote a blog posting about the recent high-profile data breaches to consumers personal data. Cybercrime has been in the headlines recently with the Sony PlayStation Network compromising 77 million user’s personal data, email marketer Epsilon exposing consumer data from fortune five-hundred companies such as Citibank and Disney, and Vodafone Australia making millions of customers names, addresses, and credit card information freely available. Bart explains how most people consider data security to be an IT problem but a breach comes with tremendous direct costs which averaged 7.2 million dollars in 2010, or $214 per compromised consumer record. Direct costs include hiring extra staff to help control the breach, external legal counsel, and credit monitoring services for victims whose personal data was compromised.

Bart states, “Although frequently overlooked, indirect costs of breaches are often higher than direct costs.” He mentions that the primary indirect costs are:

1. Staff
2. Public Relations
3. Finger-pointing
4. Government Inquiries
5. Political Attacks
6. Customer Inconvenience

To read Bart’s full article and see how these six issues affect companies that have data breaches follow the link to Computerworld’s website at http://www.computerworld.com/s/article/356892/Data_Breaches_Costly_Fallout


Bart Perkins has over 25 years experience leading IT efforts for major corporations and consulting firms. Former CIO of YUM! Brands and Dole Food Company, Bart developed technology supplier management systems to reduce risk, improve service levels and lower costs. Bart has been a Partner at KPMG Peat Marwick (Nolan, Norton & Co.), a Vice President at Technology Solutions Company, and co-founder of The Value Sourcing Group, an IT vendor management consulting firm. His consulting engagements span a wide range of industries. Bart's clients include Marriott, Blockbuster, Thermo-Fisher Scientific, Diageo, General Foods, Kraft, Nabisco, IBM, Kaiser Permanente, PepsiCo, NCR, Thomson Reuters, Barilla, Boeing, Aetna, Georgia Pacific, and Heineken. Bart writes a monthly column on IT Management for Computerworld and is a judge for CIO Magazine's CIO 100.

Roulston Technology Partner on Future of Mobile Broadband

Roulston Research’s Technology Partner Keith Mallinson recently was interviewed at the Mobile World Congress 2011 hosted by GSMA Mobile Broadband in Barcelona, Spain. He spoke about the rapid rise in mobile in general since the 1990’s especially after the introduction of GSM to now having over 5 billion connections with mobile voice and text worldwide. The rise in mobility came about through vision, reduction of costs, and the introduction of prepaid phones. He believes mobile broadband is at the tipping point of having most of the world access the internet through mobile devices. The industry will have to introduce new technologies like HSPA and Evolved to drive down costs. They will also have to increase backlog with fiber technologies to increase capacity and performance. These changes will bring about large changes in the service and delivery side along with innovation on pricing from the traditional flat rate to pricing options that offer the consumer more flexibility. He believes these changes will allow the industry to have mobile broadband accessible to the masses over the next 10-15 years. You can hear his full interview at http://www.gsmamobilebroadband.com/mwc/summary.asp



Keith Mallinson is founder of WiseHarbor, providing expert commercial advisory to technology and services businesses in wired and wireless telecommunications, media and entertainment serving consumer and professional markets. He is also regular columnist with Wireless Week, FierceWireless Europe, and IP Finance. Prior to forming Wise Harbor Mallinson led Yankee Group's global Wireless/Mobile research and consulting team as Executive Vice President. He currently forecasts the long-term outlook in mobile operator services, network equipment and devices to 2025 which is available to purchase on his website at http://wiseharbor.com/forecast.htmlhttp://wiseharbor.com/forecast.html

Roulston Media Partner on How Traditional Radio Can Battle Pandora

Roulston Media Partner Mark Ramsey wrote a blog posting several weeks ago on how Pandora radio is real radio and that traditional broadcast radio should pay attention to the medium. This past week he wrote a new posting about how traditional radio can battle Pandora radio. Most of the traditional broadcast companies dismiss Pandora and feel they have the strengths of being local, big, and useful in an emergency. Mark dismisses these so-called advantages because Pandora offers personalization, which makes it better than being local in many ways, and offers value every time the listener turns on the radio.

Mark believes that the biggest advantage Pandora has over traditional radio is through advertising and not customization, which is why terrestrial broadcasters should consider it a rival entertainment medium. Pandora’s ads can be delivered to people with similar characteristics so there is very little waste in the advertiser's budget. Some traditional broadcasters are trying to create personal versions of their radio brands. Mark dismisses this idea and thinks the main advantage traditional radio has over Pandora is content. He states, “Pandora has personalization. Radio has personalities.” Radio’s advantage is that it is live and in the moment so offering a selection of non-music content that appeals to a broad audience is the key to their success. He suggests that traditional radio shouldn’t compete against Pandora directly with a knockoff weaker version. Instead it should focus on its strengths of creating and monetizing first class on-air shows with talent that will attract advertisers. You can read part 1 of his article at http://www.markramseymedia.com/2011/05/how-radio-can-battle-pandora-part-1-wake-up-radio/ and part 2 at http://www.markramseymedia.com/2011/06/how-radio-can-battle-pandora-part-2-beyond-music/


Mark Ramsey Media is one of the best-known research and strategy providers to media companies in America. He has worked with several television and innumerable radio broadcasters over his career, including all the biggest names, from Clear Channel, CBS, Bonneville, Sirius XM, and Greater Media in the US to Corus and Astral Media in Canada. Clients from outside broadcasting have included EA Sports and Apple.

Roulston's Technology Consultant on Microsoft's New Mobile Phone Operating System Codenamed "Mango"

Roulston Research’s Technology Consultant Ross Rubin spoke about Microsoft’s next version of its mobile phone operating system codenamed “Mango” that will be introduced this fall in his blog posting this week. Mango offers improved Web browsing and email capabilities including the ability to run multiple applications at once. It is the first major update to the Windows Phone 7 that was introduced last fall and Microsoft hopes it will help them increase their market share aginst rivals in the smartphone business Apple and Google. Microsoft stated that all previous Windows phones that have been released will be upgradeable to the newest version. This will help Windows Phone efforts with its strong domestic partners Samsung, LG, and HTC. However, Ross believes that the biggest impact of Microsoft maintaining control over which handsets will be upgradeable with Windows 7 will be felt overseas. The Mango will be featured in the first Windows based phone from Nokia who will have the creative freedom to do almost anything it wants to with its Windows phone license. You can read Ross’s full blog posting on how he feels the introduction of Mango will affect Microsoft on NPD’s website at http://www.npdgroupblog.com/2011/05/where-mango-will-bear-fruit/#more-1260


Ross Rubin is a director of industry analysis for The NPD Group. With over 20 years experience analyzing and writing about the technology industry, Rubin leads The NPD Group’s coverage of consumer electronics with an emphasis on connected intelligent devices and convergence. He will be participating in the Wireless and Mobile Devices Roundtable event in New York City on June 8th at 2 PM with Farpoint Group Principal Craig Mathias.

Roulston's Media Consultant Jim Meltzer on Terrestrial, Satellite, and Internet Radio

Last month I was interviewed by Rocco Pendola for Seeking Alpha. Today I’d like to expand on some of my comments.

For a guy who has never been an exec in the media industry, Rocco asked some insightful and well researched questions. I could also see by some of the comments after the blog that some of his followers didn’t always agree with me. His followers are investors and I am an operator/consultant. Even though the common goal is increased shareholder value, we all have different points of view.

The radio industry is not dead yet, although their stock prices may cause some doubt. If some operators continue on the same path there will be fewer players at the end of the decade (and I don’t mean just through further consolidation). Radio cannot stay the same when listeners and technology have radically changed.

The operators who embrace new ways of delivering unique, compelling, and addictive content to their users will succeed. I am talking over the air, on mobile, and online. Those operators who create social networks for their like minded users will succeed. Those operators who, like Google and Facebook, learn as much as they can about their users will succeed.

Radio has to move from a “push” medium to one that is interactive. We MUST let the consumer lead our strategic decisions. Consumers want value, not “radio.” They want music and information content on their terms, not ours. It is the wise broadcaster who understands the difference.

A few of the most innovative media companies have already launched lifestyle websites that aren’t even branded with their stations’ call letters. BUT, they are promoted heavily on and sold by their local stations. Due to the existing strong relationships their local advertising sellers have in the marketplace, they are generating new advertising revenue streams.

I stand firm on my comments about most of the media companies discussed in Rocco’s interview. If I had it to write it over again, I would have focused more on Clear Channel’s tremendous debt and less on operations. They do have an understanding of the digital space, but due to their heavy debt load, are not focusing on developing their terrestrial assets (local radio stations) to serve as launching pad, or large megaphone to the Internet. The best way to do that is to serve their local communities with more local, entertaining and compelling content.

Most of the comments generated by the interview were directed at statements I made about Sirius/XM. To set the record straight, my wife and I have 3 subscriptions to the service and are both frequent users. My concern regarding their long term success isn’t about content as much as cost to the consumer. There is no barrier to entry for content providers on the Internet, and how much and if they charge for their service could affect the Company’s growth.

Here is a link to the interview. http://seekingalpha.com/article/267923-thoughts-on-terrestrial-satellite-and-internet-radio-from-jim-meltzer?source=from_friend_client



Jim Meltzer is the Owner of Meltzer Media Management, a broadcast management, sales, internet and organizational firm founded in August 2008. Mr. Meltzer was previously a Vice President and General Manager at CBS Radio. Prior to that, he was a Regional Vice President at Clear Channel Communications. He has over 30 years of experience as an executive in the radio broadcasting industry, mostly for publicly traded companies. Jim will be participating in our June 9th Social Vs. Legacy Media Roundtable at 10 AM in New York City with former Yahoo Executive Larry Cornett.

Roulston's Technology Consultant on Innovation in Wi-Fi

Roulston Research’s Technology Consultant Craig Mathias recently wrote an article on how the wireless-LAN industry continues to see remarkable innovation despite being around for over twenty years. He points to the introduction of new products from Motorola and Meru Networks as perfect examples of how the industry continues to reinvent itself. Motorola introduced a new high-end controller called the NX 9000 which has the potential to evolve from simply a controller to a platform of applications. Craig states, “As controllers are basically single-board computers running specialized software, why not host that software on a platform capable of much more? And, indeed, Motorola is going to move in that direction over time.”

Meru Networks announced the new AP400 series which allows users to have up to four radios at capacity levels that were once thought to be unheard of. Craig expects the level of innovation in this space to slow over the next three to five years based on his belief in the life-cycle of high technology products. He explains, “Products and services are essentially good enough to address almost any common application with very favorable price/performance, and that further innovations from that point would more likely be in pursuit of incremental enhancements in revenues and profits (via product-line extensions), not the application of new basic technologies.” This will eventually allow people to focus on applications instead worrying about constantly upgrading rapidly changing technology. You can read Craig’s full blog post at
http://www.networkworld.com/community/blog/wi-fi-no-slowdown-innovation-yet

Craig J. Mathias is a Principal with Farpoint Group, an advisory and systems-integration firm based in Ashland, MA, specializing in wireless networking, mobile computing, and related technologies, products, and services. He will be participating in the Wireless and Mobile Device Roundtable event on Wednesday June 8th at 2 PM in New York City.

Roulston's Retail Consultant on Rising Raw-Material and Labor Costs at Specialty Retailers

Roulston Research's Retail Consultant John Kyees gives his take on how retailers have been dealing with higher raw-material and labor costs. Gap reported last week that raw-material costs are rising faster than expected and faster than they will be able to raise prices. This will reduce profit margins at the company for the year and it is feared that other specialty retailers will face similiar problems. John explains, "Actually I think cotton price increases have slowed a bit. Gap is in that tier of retailers that can't raise prices easily without incurring a competitive disadvantage. Those retailers who are highly differentiated will be able to add 5-10% to their retail prices and preserve their profitability. Gap sales basics for the most part which are identifiable and very price competitive. Gap is also probably heavily concentrated with China sourcing which means they're experiencing labor cost increases as well as cotton cost increases. Retailers such as Urban Outfitters have maintained a diverse sourcing structure with China only accounting for about 20-25% of their sourcing. This gives URBN leverage with the Chinese factories in that URBN can move production to a lower cost country in which they've already established a reliable factory base."


John Kyees retired from Urban Outfitters on June 30, 2010. He joined the company in November 2003 as the CFO and served in that capacity until February 2010. John is a 33-year veteran in the retail industry with CFO roles at several retailers.

Roulston's Social Media Consultant on LinkedIn IPO and Valuation

Roulston Research's Social Media Consultant Rob Enderle has an interesting perspective on LinkedIn's initial public offering. The company sold 7.84 million shares at $45 last Thursday and shares soared 109% on the first day of trading. Rob states, "The feeding frenzy surrounding LinkedIn is largely the result of an imbalance between the number of investors and the amount of equity available for them to invest in. In short we have a supply/demand imbalance which is driving the stock higher than the company performance can sustain. This has likely created a bubble and a problem for the companies coming after because LinkedIn’s prospectus anticipates slowing revenue growth and uncertain profits going forward which could cause this bubble to break prematurely and before the other IPOs can come to market.

The big problem for the category is that the sustaining revenue that supported a similar trend surrounding Google’s IPO has largely been consumed by Google and Microsoft leaving it unavailable to the Social Networking vendors. Granted through Microsoft Facebook has some extra leverage but Microsoft isn’t Google and the uplift they can provide, as a result, is much more limited. Large IPOs also drive venture investment into competitors and social networking is still in its infancy and the combination of privacy concerns and legislation could cause any one of these companies to fail if the right, and increasingly likely, set of scenarios were to take place. Given we are, in the US entering an election period and the topic has already become an issue, these risks appear to be increasing at the moment. In short the over valuation of the social networking companies is the result of a feeding frenzy on a limited resource and while I believe we have some headroom through the Facebook IPO, there is increasing risk it will collapse prematurely. That should be factored into related investment decisions."


Rob Enderle is President and Principal Analyst of the Enderle Group, a forward looking emerging technology advisory firm. He specializes in providing rapid perspectives and suggested tactics and strategies to a large number of clients dealing with rapidly changing global events.

Roulston's Retail Consultant Bloomberg Interview on Wal-Mart Earnings and Outlook

Roulston Research’s Retail Consultant Craig Johnson of Customer Growth Partners recently appeared on Bloomberg discussing some of the major challenges Wal-Mart is facing moving forward. The company’s first quarter results beat Street expectations by 3 cents coming in at 98 cents per share. However, sales of stores based in the United States fell for the eighth straight quarter. Their core consumers have been hit hard by the economy and they have been losing sales to bottom-end food retailers like Aldi and Save-A-Lot. Wal-Mart’s super-center stores were created for the retail wars of the past but now consumers like convenience in addition to low prices so they have been shopping at other retailers. The company is rolling out smaller retail stores domestically to better compete with these stores but Craig feels they are 2-3 years late with this concept.

The other major problem the company has been having is that they have been losing sales to online retailers as consumers seek more convenience in their shopping habits. Consumer electronics has been a major growth driver for Wal-Mart over the past decade but the company has been losing sales to online retailers like Amazon.com. This is a major concern for them long-term and they have recently purchased online Chinese grocery store Yihaodian and social media start-up Kosmix, which is focused on e-commerce, to broaden their exposure in this area. However, in this space they don't have a major footprint and it will be one of their big challenges moving forward. You can view his whole interview at http://www.washingtonpost.com/business/johnson-says-wal-mart-losing-sales-to-online-retailers/2011/05/17/AFMZzo5G_video.html

Roulston's Retail Consultant on Wal-Mart's Entry into Home Delivery and Handgun Businesses

Walmart has recently decided to test out a home delivery system in parts of the country for consumers to purchase food, health-and-beauty products, medicine, and other basic household items online and have them delivered to their house with fees starting at $5 in an attempt to fight off Amazon.com and other online retailers. In addition, they have decided to sell shotguns, rifles and ammunition in half of their domestic stores to try and increase sales on a firm-wide basis. Roulston Research's Retail Consultant Maggie Gilliam gives her thoughts on Walmart's new strategy. She states, "Walmart pulled handguns out of all stores and cut back on other firearms when there was a lot of public outcry concerning them. They clearly don't belong in all stores in any event and require a lot of supervision.

However, guns have become a growth business in the last several years, and the company has been missing out to a considerable extent. In going from one-third to one-half of its stores though, the company is only going to be adding them into 17% of the stores incrementally. The addition is not going to move the needle of overall sales.

Walmart has a very successful home delivery business in the UK through its ASDA subsidary. It also conducts home delivery in Japan, somthing Seiyu started ten years ago and before Walmart acquired the company. However, home delivery hasn't been high priority at Walmart Japan, until this year, but the company is going to develop it. San Jose is a test in a less densely populated area and a state where powerful unions are hampering the development of Walmart's grocery business. Walmart's aim is to satisfy consumers however they want to shop."


Maggie Gilliam is founder and principal of Gilliam & Co. and publishes a monthly publication called the Gilliam Viewpoint which covers the events taking place in the retail and related industries.

Roulston's Technology Consultant on Microsoft's 8.5 Billion Dollar Aquisition of Skype

Roulston Research's technology consultant Robert Rose gives his take on the Microsoft 8.5 billion dollar acquisition of Skype last week. He states "The Monday morning quarterbacking has begun and all the pundits are debating whether Ballmer’s deal makes any sense. So, nearly a week later – and I (like the rest of the market) have run through an entire range of Kubler-Rossesque emotions about the deal. First I had disbelief that they paid so much (and I still believe they did). Then, there was the outright incredulity at what an idiotic move it was. And, then, after I’d thought about it a bit more – and read a bit more I shifted my opinion. Here are the things that I believe about the deal.

1. They had to do it. Almost certainly the high price was because Ballmer felt like he had no choice. It was going to be Google – and that was just too much for Microsoft to stomach. They needed to make a move. I mean certainly nothing has changed (technologically) since the eBay sale. And, one might even argue that Skype 5 is getting really horrible reviews. But, in the end – Microsoft needs to start making bold moves and this was one of many I suspect are coming.

2. This has everything to do with Nokia. Putting Skype (and Windows Phone 7) on Nokia phones will make Microsoft instantly credible in the market for smartphones. And, it could theoretically keep Skype away from Google, Apple and Android devices. Although….

3. Licensing will be huge. Microsoft will have to monetize Skype and monetize it quickly – so I see them doing deals with (at least) Facebook – and possibly Google and Apple to put Skype applications on their platforms. This will be tricky since in some cases it’s there – and of course free… So – what that deal will look like is anybody’s guess.

And then… my way out there thought…

4. This tees up Microsoft to buy RIMM. Certainly this has been brought up before – and with RIMM really struggling right now and if the price gets low enough in the next 18-24 months (guessing in the $15/$20B range)… I could definitely see Microsoft pulling that out…. That would instantly make Microsoft the #1 mobile platform in the world – and certainly the leader in the business enterprise… Bing is now the “official” search engine for Blackberries – and I’d look for more deals like that coming soon.


Basically, if MSFT is going to have any hope for major growth – they MUST become the number 1 or 2 player in the mobile market. They HAD to buy Skype. They HAVE to be successful with Nokia – and at some point – unless Windows Mobile Phone OS takes off virally (which I’m not convinced it will) then they will need to buy their way in."


Robert Rose is founder of Big Blue Moose and innovates creative and technical marketing strategies for his clients. You can view his website at http://www.bigbluemoose.net

Imperial Holdings: Large Upside Potential

A New York presenter recommends Imperial Holdings (NYSE: IFT, $9.74). The company has carved out a leading position in a very niche market of life insurance premium financing. IFT IPO'd back in February and now has sufficient capital to finance on its own, as opposed to borrowing from third parties at prohibitive cost. The company's structured settlements business is now breaking even and growing briskly with repeat business becoming more and more prevalent. The CEO has solid background in the space and has taken another company public, which was later sold at a favorable valuation. The stock is trading at book at the moment. The presenter believes the book value should grow at a mid-teen rate in the next few years and the stock then could trade up to 3x book.

Roulston's Energy Consultant on Alaskan Pipeline

Roulston Research’s energy consultant Kevin Lindemer shares his thoughts on Wednesday’s Wall Street Journal article titled “Shrinking Oil Supplies Put Alaskan Pipeline at Risk.” Kevin states “Based on the article’s reference to E&P activity in the Arctic, it is reasonable to assume the producers feel there is sufficient resource available to keep the pipeline flowing above minimum for decades. Note that some interviewed said it could take up to 15 years just to bring on new fields. We don’t know what, if any, new fields are coming on stream in the near to mid-term that might help maintain flow. However, the pipeline company says 2013 is that date they may not be able to maintain operations.

If we assume a 6% decline rate as stated in the article, then in 2013 the flow rate will be +/- 500,000 bpd assuming no new fields coming on line. This is equal to about 9% of the US crude oil production in 2010. Therefore, if the pipeline shut down there would be an immediate drop of 500,000 bpd or about 9% +/- for US crude oil supplies.

Will this happen?

o It looks like it can be delayed with some technical fixes. But without more volume, these technical fixes may lose their effectiveness.

If the pipeline shut down would it impact prices?

o World oil prices would probably not exhibit a shock behavior if the line shuts down. Something like this would be known to be happening sometime in advance. Therefore the markets would ‘discount’ the event. It would have a long-term impact. Since world oil spare capacity is now only about 4.5 mbd, the loss of 500,000 from the US would reduce spare capacity by 11%. This would make markets tighter and could lead to a long-term increase in prices.

o USWC markets are the primary delivery point for Alaska crude oil. A shutdown of the pipeline would not have much of an impact on gasoline prices. Currently, the USWC markets receive/buy a lot of crude oil from the Middle East and locations further away than Alaska. Therefore, the delivered price to the west coast reflects its net import position. If the west coast was a net exporter of crude oil and the pipeline shutdown, then crude oil prices would increase by the incremental cost of transportation to replace the lost Alaska crude oil.

At some point, the continuing delay of new production on the North Slope will make this a moot point. If it is delayed long enough, physics take over and the line will be shut – it can’t remain open based on promises and plans. If the line shuts down, it not only causes the loss of an immediate 9% of US production, it would essentially end oil and gas production in Alaska, regardless of the estimated size of the resource base.”

Roulston's Media Consultant on Pandora Radio

One of the primary questions being asked today in the media industry is whether Pandora is real radio. Pandora is an automated music recommendation service that allows individuals to enter a song or artist that they enjoy and will make recommendations based off their initial input. From there users can provide feedback about whether or not they like the songs selected and Pandora will take that into account for future selections. Many broadcasters and people in the industry have dismissed Pandora as a radio service for several reasons that include:

1. "Pandora isn't radio because it isn't local."
2. "Pandora can't save your life in a crisis."
3. "Pandora is a feature not a brand."
4. "Internet radio reception is spotty and drops a lot."
5. "Pandora is non-social."

Roulston Research's media consultant Mark Ramsey challenges these typical arguments in his recent blog posting. Follow the link below to view his recent post.

http://www.markramseymedia.com/2011/05/yes-pandora-is-radio/

New Oriental Education: Clear Leader in Rapidly Expanding Market

A New York presenter recommends New Oriental Education and Technology (NYSE: EDU, $119.34) as a Buy. The company has the largest share, the only recognizable brand and the strongest network of learning centers in a fast-growing market for private education services in China. Still, even at 2 million households, EDU has only captured less than 1% of the total opportunity. The Street has focused on a recent drop in margins, but the company is expanding in a much more controlled fashion now. New tutoring services are gaining ground fast. There is $0.5 billion in cash on the balance sheet and no debt.

NXP Semiconductors: Upside from Multiple Growth Areas

A New York presenter recommends NXP Semiconductors (NASDAQ: NXPI, $34.18). The company stands to benefit from multiple growth markets. The biggest opportunity lies in near-field communication or NFC, where the company is the recognized leader. NFC allows smartphone users to make payments just by waving their phones near a point of sale terminal. Some of the new Android models already have NFC chips, and Apple is rumored to include it in the next-generation iPhone. NXP has also developed a new solution for compact fluorescent bulbs that allows dimming, a multibillion market potentially. RFID is finally going mainstream, another area where NXP is very strong at. The company has been saddled with debt on its separation from Phillips in 2006, but has been paying it down. The presenter forecasts $4 in earnings power. Based on 12-15x the peer group is trading at, the upside could be quite significant.

ACCO Brands: Big Upside in Margin Expansion

A Boston presenter likes ACCO Brands (NYSE: ABD, $9.47) at the current level. This leading supplier of office products is finally growing revenues after two difficult years. The new CEO's focus on rebuilding customer relationships is paying off. The company has rationalized its cost structure and can now really lever even a modest top-line expansion. ACCO targets mid-teen operating margins versus 8.6% currently. With another debt refinancing likely in 2013, the earnings power may reach $2.50-$3.00 at $1.6bln - $1.7bln in sales.

America's Car-Mart: Profitable Niche

A Boston presenter recommends America's Car-Mart (NASDAQ: CRMT, $25.55). The company focuses exclusively on selling used cars to customers in rural areas with bad or no credit. CRMT's competition is highly fragmented. The company is expanding its dealership base, but is doing it in a very controlled manner. CRMT provides all of financing for its customers. Loss rates are in the low 20%, but the highly profitable model has sufficient room to accomodate these losses, which have been improving in recent quarters. The stock is undervalued here, based on projected earnings. The company has been actively repurchasing shares and intends to continue with stock buybacks.

Universal Electronics: Upside from Growth in Asia

A Boston portfolio manager recommends Universal Electronics (NASDAQ: UEIC, $28.72) as a buy. UEIC dominates the market for wireless remote controls. The company acquired one of its suppliers Enson last November. The deal is crucial to UEIC's prospects as it provides the platform to substantially expand the company's presence in Asia and other fast-growing emerging markets. The presenter targets a 30% upside from the current level. The balance sheet has a significant cash position and little debt, which is expected to be paid off by the end of the year.

Cleveland Biolabs: Important Near-Term Catalysts

A New York-based portfolio manager points to several pending developments that can move Cleveland Biolabs stock (NASDAQ: CBLI, $7.44). A BARDA grant is one potential near-term catalyst. Other catalysts possible later this year include the HHS issuing an RFP for an anti-radiation drug where we may learn how much the agency plans to allocate for an emergency stockpile, the company starting trials with its CBLB502 drug seeking to reduce negative side effects of radiation treatment on cancer patients, and publication of research papers.

Palomar Medical: No Change in Bullish Outlook

A New York presenter remains just as bullish on Palomar's prospects as he was two months ago when he presented the name at one of our small cap idea forums (NASDAQ: PMTI, $14.07). He noted then that the stock had a very big and fast run up and would likely take a breather to offer an even better entry point. PMTI has dropped substantially from the $16 level, as he predicted. The presenter argues that it's a 2-3 year story that has the potential to work well enough to double the stock price over that time.

Roulston Consultant to Appear on Bloomberg This Week

Craig Johnson, President, Customer Growth Partners and Chair of Roulston Research Retail Group, has recently been quoted in various media outlets, discussing the outlook for some individual companies in the retail space. He will appear on Bloomberg TV & Radio this Wednesday, March 23, in the 5:00 PM ET hour. He will be discussing retail outlook and WMT vs TGT vs Aldi in particular.

Craig Johnson is President of Customer Growth Partners of New Canaan, CT, consultants serving the retail and other consumer industries. He has three decades of experience in consumer service industries, in both senior executive and consulting roles, and has advised institutional investors and private equity participants on opportunities in the consumer discretionary sector. He is cited as an authority on retail and consumer issues in publications such as Business Week, Fortune, New York Times, The Times (London), USA Today, and the Wall Street Journal. His retail clients have included firms such as BJ's Wholesale, Crutchfield Electronics, JC Penney, Lands' End, Lowe's, Perry Ellis, Simon Group, Toys R Us, Walt Disney, Westfield America and Williams-Sonoma.

Summer Infant: Q4 Comments

A Boston presenter shared his thoughts on Summer Infant's (NASDAQ: SUMR, $7.05) Q4 results and outlook. He is disappointed the company's new car seat roll-out is taking longer than expected, but is encouraged that SUMR has "cleared the desk" per the CEO in regards to one-time charges. The presenter is also apprehensive about the company's longer-term plans to make a transformative acquisition.

NETGEAR: Gaining from Growth in Networking Products

A Boston presenter recommended NETGEAR (NASDAQ: NTGR, $31.15) as a buy. This developer of networking and security products for home and small business markets is capitalizing on the growing demand for routers, switches, and security software and devices, as both consumers and small businesses are rapidly increasing their consumption and sharing of digital media. A lean business model allows the company to maintain margins in a fiercely competitive space, but NETGEAR's higher reliability and quality remains the key to its prospects going forward. The company is led by a very experienced management team. A pristine balance sheet is another plus for potential investors. The company introduced 80 new products last year and remains a leader in innovation in this segment, with another 20 products marking their debut this quarter.

OpenTable: Short on Valuation

A Boston presenter recommends shorting OpenTable (NASDAQ: OPEN, $89.11). The stock has moved close to 200% in the past year and the current valuation is based on unrealistic assumptions about the company's growth potential, according to the presenter. There is limited competition currently, but recent entries into the space signal threats to the company's dominance in online restaurant reservations. There are also indications that the National Restaurant Association could be considering its own reservation system as part of the membership package. Smaller establishments, which account for a vast majority of domestic restaurants, are unlikely to go with OPEN's pricey offering.

LogMeIn: Maintaining a Sell Short Recommendation

A New York presenter maintains a conviction short on LogMeIn (NASDAQ: LOGM, $34.87). He stresses that the number of customers the company is adding outside its main product, the Ignition application, has been declining. These customers carry more value, since the accounts generate recurring revenues, as opposed to a one-time fee the company collects for Ignition. Furthermore, Ignition reviews continue to point to free alternatives. Finally, Windows 7 has a built-in functionality duplicating what Ignition does.

Schweitzer-Mauduit: Will Gain from Increased LIP Adoption

A Boston presenter likes Schweitzer-Mauduit (NYSE: SWM, $55.76) at this level. The company is the global leader in reconstituted tobacco products and low ignition paper. LIP is much safer than the regular product and as such is being mandated into use by regulatory authorities around the world. The European market, where LIP adoption is slowly gathering pace, is a very important growth opportunity for the company. SWM has a clean balance sheet and is on track to generate $100 million in FCF this year, following its multi-year manufacturing rationalization. Clarity over licensing arrangements for LIP in Europe and long-term demand for RTL will be the near-term catalysts.

Lufkin Industries: Pump Alternatives and Cheaper Competition Threaten Position

A New York presenter recommends a short on Lufkin Industries (NASDAQ: LUFK, $74.12). The company is a high-cost manufacturer with limited capacity to compete on price. There are a number of alternatives to its main product beam pumps, which have traditionally been the product of choice in artificial lift. Competing pumps work at a wider range of depths and are capable of handling higher volumes. There is also a growing threat from Chinese manufacturers that are able to sell the product significantly cheaper. The quality of the imported product has improved substantially as well. The presenter believes the downside can reach 20% from the current level, based on 6x his estimate for LUFK's peak EBITDA.

KVH Industries: Recurring Revenues on Verge of Ramping Up

A New York presenter likes KVH Industries' prospects (NASDAQ: KVHI, $14.26). This provider of mobile communication services for commercial ships worldwide has completed an initial buildout of its marine global network and is now able to deliver internet and mobile services for the vast majority of shipping routes. KVHI has the most compact and the easiest to install system in the space. Recurring airtime revenues are the best part of the story. KVH's system has been installed on 1,000 ships so far, but the total market opportunity is 130,000 ships. At $2,000/month/unit, incremental earnings from airtime charges can add up very quickly. A recent new contract with Coast Guard underscores the advantages of KVH's offering and boosts the company's credibility.

Nordion: Resumption in Isotope Supply and New Sources Boost Prospects

A New York presenter recommends Nordion (NYSE: NDE, $11.64) as a buy. This provider of medical isotopes, targeted therapies, and sterilization technologies has seen its share of the isotope market fall drastically, due to interruptions in supply from the NRU reactor in Canada. In August, the reactor resumed operation after a prolonged shutdown. NDZ has also reached an agreement with a Russian-based producer to diversify its sources. Sales in the company's two other segments have been expanding at a rapid pace. Nordion has just announced a $0.40 dividend and a very sizable stock buyback. Resolution of the arbitration with the Canadian government expected in 2H 2011 can be a significant catalyst.

Roulston Retail Chair Discussing Retail in Media

Craig Johnson, President, Customer Growth Partners and Chair of Roulston Research Retail Group, has recently been quoted in various media outlets, discussing the outlook for some individual companies in the retail space. Please use the links below to hear his thoughts.

http://www.chainstoreage.com/article/reinvented-department-stores-and-malls-see-robust-rebound

http://www.bloomberg.com/news/2011-02-09/johnson-discusses-increase-in-shopping-mall-spending-audio.html

http://www.usatoday.com/money/industries/retail/2011-02-12-walmart-comeback_N.htm

http://retailtrafficmag.com/charts/dept_stores_resilience_02152011/#

Palomar Medical: Entering Direct to Consumer Market

A New York presenter is bullish on Palomar Medical Technologies' prospects (NASDAQ: PMTI, $16.16). The company is seeing encouraging signs in its core business of selling skin treatment products and systems to medical practioners, but the attraction of the story is PMTI's recent entrance into direct to consumer skin rejuvenation space. The company's PaloVia wrinkle-reducing product started selling on QVC two months ago, and the initial results have exceeded internal expectations. Management sees the product going mainstream in the not so distant future, based on its cost, efficacy and relative ease of application. Potential upside in the $16 billion domestic skin beauty market is very significant. Depending on the number of treatments sold, incremental earnings from PaloVia can reach $1-2/share.

Rock-Tenn: Smurfit Acquisition Strengthens Position

Rock Tenn(NYSE: RKT, $70.68) is another name from Roulston Research's recent New York idea forum. The Smurfit-Stone acquisition announced last month vaults the company to the #2 position in the growing containerboard space. RKT's CEO is well-known for making successful transformative acqusitions and this latest deal could be his best. The company has historically inderpromised and overdelivered on projected synergies from acquisitions. The presenter believes this trend will be maintained here as well. Consolidation in the space has been the driver for high utilization rates and increasing pricing power. Another price increase is likely in the early spring. Should one transpire, RKT will be on course to generate $13/share in fully taxed cash flow. Based on a conservative 9 times multiple, the upside from here is close to 70%, or 30% with no price increase.

AB InBev: 30% Upside Based on Cash Flow

A New York presenter likes AB InBev (NYSE: BUD, $56.04) at this level. The largest global brewer is set to add $1 billion+ in cost synergies, following the 2008 merger, to the original target. Leverage reduction targets will be met 2 years ahead of plan, triggering a change in leadership incentive dynamics from debt paydown from the deal to share appreciation. The Street is misreading a recent slowdown in Brazil as indicative of future problems in the country, but the presenter disagrees. The comp growth in this all-important market for the company is set to resume shortly as competitors implement their price hikes to match BUD. Based on the presenter's FCF estimates, the upside from her ecould reach 30%. A substantial dividend increase as well as stock buybacks are strong possibilities.

First Solar: Significant Downside Potential

A NY-base presenter recommends a short on First Solar (NASDAQ: FSLR, $157.69). He argues that the company is no longer the low cost producer in the fiercely competitive solar space. Gains in the efficiency of its modules have been decelerating and FSLR's cost advantage may no longer be there. With supply likely to substantially exceed demand this year, First Solar may be the only manufacturer left unable to price its product competitively. Cuts in government subsidies for solar across Europe, and particularly in the two largest markets Germany and Italy, are another major threat to the company's profitability.

Gap's Change at the Top Confirms RBR Mall Tour Takeaways

One of the key takeaways from our November mall tour at Westchester with Arnold Cohen's the former COO of J. Crew, was lack of focus or defined customer in Gap's strategy. Thus, it came as no surprise to us when it was announced earlier this week the company was replacing the head of its namesake brand.

US Bancorp: 30-50% Upside

A New York presenter likes US Bancorp (NYSE: USB, $27.22) at this level. The 5th largest bank in the US has maintained its conservative credit culture during the recent crisis and used severely discounted valuations in the space to make targeted acquisitions. USB doesn't get enough credit for its robust fee businesses. Recent results point to a pick up in loan growth, but significant room for improvement remains, with only a 26% utilization rate in the wholesale operation. A significant dividend increase is the management's top priority, pending a response from the FED on the bank's comprehensive capital plan.

ARM Holdings: Short Based on Valuation

A New York presenter recommends a short on ARM Holdings (NASDAQ: ARMH, $26.99). He respects the company's dominance in semiconductor IP for the mobile market, but believes that the valuation has gotten ahead of itself. The threat from Intel, while dismissed by many on the Street, is credible from the presenter's perspective. The stock is trading at 27 times most bullish earnings estimates for 2011 and investors may question where more upside can come from.

Vitesse: Settled with SEC and Now Poised for Strong Growth

A Boston presenter likes Vitesse Semiconductor's prospects now that the company finally has settled its option-backdating case going back years with SEC and received a clean audit for its fiscal 2010 report. Vitesse's solutions cover all areas of enterprise and carrier ethernet markets, and the company has strong relationships with most of the leading players in the industry. VTSS has substantially lowered its costs by outsourcing manufacturing operations, while at the same time increasing its R&D spend. The company is adding new products at an accelerated pace and has scored a number of important design wins lately. Fiscal 2011 will be flat, as legacy products go away and new products start kicking in, but growth is poised to resume strongly in FY 2012. The presenter targets $8 or 50% upside from the current level.

Global Partners: Still Recommended

GLP is still recommended by one of our presenters (NYSE: GLP, $29.48). The presenter has just added to his position. This distributor of refined petroleum products and natural gas stands to gain from ongoing divestitures of non-core midstream assets by majors.

GSI Commerce: Very Overvalued at This Level

A Boston presenter recommends a short on GSI Commerce (NASDAQ: GSIC, $23.50). This provider of e-commerce solutions is facing a serious threat from Amazon, Digital River and some larger rivals in a fiercely competitive market for outsourced online services. The company has been able to grow its top line very consistently, but profitability has remained elusive. Five largest accounts generate close to 40% of the total revenue, and there is a real possibility some of these customers may take their e-commerce operation in-house. The stock is trading at approximately 100 times projected 2012 earnings. The share count has been diluted significantly in the last several years to help finance a string of acquisitions.

Famous Dave's of America: Stable Growth in a Niche Market

A Boston presenter likes Famous Dave's of America (NASDAQ: DAVE, $10.56). This casual-dining chain specializes in BBQ dishes served in a unique, live-music accompanied setting. Over 70% of all stores are franchised, with 90 more units projected in the next 5 years. The company is rolling out a number of initiatives to boost same store sales. DAVE generates healthy cash flow. The stock is trading at multiples below its historical averages and versus the peer group. The company has been buying back shares and just last December announced another authorization for more than 10% of all shares outstanding. The Street's coverage is very limited.

Magnum Hunter: Well-Positioned in Three Largest Resource Plays

A Boston presenter recommends Magnum Hunter Resources (NYSE: MHR, $7.02)as a buy at this level. The company has been adding to its assets in Bakken, Marcellus, and Eagle Ford Shale, three of the top five most prolific domestic unconventioanl resource plays. MHR's old management returned to lead restructuring in 2009 and has been successfully pursuing a balanced acquisition strategy, buying up orphaned properties in MHR's core areas of operation. Production is forecasted to ramp up four-fold this year. The presenter is targeting a 50% upside, base on his NAV calculations.

Blackboard: Losing Market Share

A Boston presenter recommends shorting Blackboard at this level (NASDAQ: BBBB, $39.11). This provider of learning management software for the education industry still dominates the space, but it has been losing share lately to open-source competition. Schools hit by budget constraints are increasingly turning to much cheaper options. The company has just lowered earnings guidance for Q1 and full 2011.

The Tale of Two Economies

As we close the book on 2010, we can’t help but sense a growing frustration politically, economically and socially. Yes the market had a good year, as we continued to see a rebound in consumer spending and business profitability off its trough of 2008-2009. But the housing bubble and subsequent monetary and fiscal response has itself created new issues. Worldwide debt has now become a focal point. We see a ten year plus period of government-induced growth combined with fiscal and monetary irresponsibility can create. Now we have to see if this realization can lead to some soundness in responsibility.

What so many businesses are realizing is just how bad it got and many have still not forgotten their experiences from the last (technology) bubble of 2001. This has caused businesses to hoard cash and protect balance sheets. Over two trillion dollars are on the sidelines frozen by fear of domestic tax policy and government regulation and general lack of incentive to spend. Without clarity, much of this money lies in overseas accounts of multi national companies unwilling to repatriate the asset in the U.S. due to inefficient tax and regulatory policy.

The consumer (70% of the economy) dipped its collective toe back into the spending marketplace in late 2010. But increasingly this sector is reflecting the two tiers of those who have it and those who don’t. Not only do we maintain a high unemployment rate but clearly 20% of the labor force today is unemployed or underemployed. This is a great weight, unlike past recoveries which have tended to see unemployment trend lower much quicker. This is reflective of companies not spending and hiring and not certain of how to allocate assets to grow.

Add to this the economic reality now facing government. Around the world we see the hangover of politicians who have not taken responsibility for funding social programs and spending over the last few decades. It is catching up with them. Starting with Europe where social spending has been the most aggressive the debt burden is the harshest. Without the ability to print money the way the U.S. Federal Reserve can produce, the sovereign debt of many in the European Union is going to be under pressure for years until spending can be right sized to revenue. It remains to be seen how this can be done ,but in the U.S.A. we have a similar issue with our states and municipalities. They also can not print themselves the cash to pay for the benefits and programs promised to public employees and retirees as well as to fund programs currently planned.

Domestically, the focus has been on the federal debt and although this will be a large concern the more immediate problem is our state and municipal spending issues. We will be watching closely as this is we believe the biggest risk looming in the next 12 months and how our government spending and revenues trend. Government has to start spending on infrastructure and job creation. Spending on social stimulus and tax creativity does not create jobs. The most important measurements to watch on this front are household formations and business formations. This will affect unemployment on a more permanent basis.

In 2011 the consumer is not going to grow enough to bailout the government. Key indicators to watch for the consumer are disposable income and savings rates. As long as these two can maintain the current high levels relative to the past few years, we should see stability. The overwhelming issue to the consumer is housing. With regional exceptions, primarily in affluent areas, housing has changed the landscape for a generation. No longer is real estate the sanctum of growth so many had based their retirement and savings plans upon.

This has changed confidence and shaken our banking system. The hangover is by no means over. Without government policy to change the overhang of inventory and the approximately 20% of homes in America in foreclosure or default the banking system will teeter on this issue indefinitely. This risk is real and creates a logjam for further spending, bank lending and overall consumer confidence. Unemployment will remain frustratingly influenced by this issue. Bank lending reluctance is in large part directly influenced by the housing and commercial real estate portfolios of the financial system locked up by underwater valuations. The impact to mark to market assets that make up a crippling percentage of bank balance sheets must be addressed for any significant change in consumer growth or bank credit availability. Banks are only aggressive now to the good credit customers. To others the doors are and will remain closed. The tale of two economies.

For the markets we are watching for guidance of these indicators we mention above. In general, the institutional invest has been bullish but the individual investor remains in large part on the sidelines. Although in the past this has been a positive indicator, we believe today it is more indicative of the uncertainty of consumers and their confidence in their government leadership. The recent elections created some short term stimulus if in nothing else but hope. The results remain to be seen. Clearly many bonds have become an unattractive alternative to stocks except in the municipal and higher corporate risk sectors, but only for those who understand these markets. We believe the fixed income market today is best exposed if done through hedging and more aggressive asset management. We believe this lowers risk and volatility.

In equities we see a two tier market reflecting the two tiered economy. As we have seen value outperform growth in general over the last decade, it is quite revealing of the tech bubble in the early part of the decade and the financial bubble more recently. It helps explain the impact of compounding to those who monitor performance closely. International exposure has helped earnings and performance in particular in the last few years, and we believe that will continue to be the case. Sectors with higher international exposure include Technology (54%), Materials (43%), Industrials (35%), Consumer Staples (33%) and Energy (29%). It is interesting to note these sectors are all doing relatively well. Despite the fact that Health Care also has (29%) international exposure, its performance among groups, strong return is noticeably absent. This is very reflective of the government regulatory uncertainty we mentioned earlier continuing to drag on the economy.

The economy is split. Those industries exposed to international customers, commodities and industrial growth are excelling. The U.S. farmer and miner as well as the trucker and locomotive engineer are busy. Factories in capital goods (especially overseas) are chugging along well. China is continuing to be the engine of growth as do some of the other emerging economies. We don’t see this changing without a significantly greater debt problem either in sovereign debt or the U.S. banking system, which does still create the potential of significant volatility. We like the general valuations in the market. At the same time, diversification and hedging are key ingredients to deal with the uncertainty that any of these unknowns might influence.

The world markets have become more volatile. Faster flows of information and media hyperbole have been discussed many times by us as having significant impact to the markets and not all good. But the reality is right now that in large part the individual investor fled the equity markets in the last few years and now has watched the appreciation of the last cycle mostly from the sidelines. A lot of cash is in money markets and low yielding savings. Mutual fund flows have moved out of domestic equities (reflecting mostly individuals) for over 18 months. We will watch the measurements we discuss here very closely in 2011, as well as the government and investor response. An asset advisor needs to be rotating to respond to this environment and we intend to be engaged.

See Roulston Research Consultant Today on CNBC

Paul Ingrassia, Former President, Dow Jones Newswires, and member of Roulston Research's Consulting Team will be on CNBC today at 1:20 PM ET to talk about the Detroit Auto Show.

Tatum/Roulston Report

This months Tatum Survey clearly reflects the improvement in outlook. From all of our discussions with managements one thing is clear. The election didn’t actually change much, but it sure changed business attitudes. The results of outlook are substantial over the last two months in expectations especially for hiring and backlog growth. In addition capital spending looks to be another area of optimism.

On the other hand multiple conversations this week with bankers are not heartening. The Tatum Survey reflects that access to bank lending is showing little improvement and the banks are confirming that they have real estate problems that are not going away anytime soon. This is a heavy weight on capital access. Though many companies are flush with cash, the reality is that business formations, household formations and unemployment reflect a two year period of few options for those not established. This trend is stubbornly reflecting a two tier economy. Mining, farming, transportation, manufacturing, energy and many downstream channels in these industries are improving and some at record levels. With personal savings at still relatively high levels and disposable income higher the consumer is in recovery but their balance sheet just does not seem pretty.

We believe there is relative strength and good momentum fed by some optimism of Washington movement. In the past the hope usually does not necessarily lead to reality. That having been said there is improved growth, there is optimism and those two factors should never be underestimated.

Tatum LLC is a nationwide firm specializing in the providing financial and information technology services and executive fulfillment to companies across the country. This joint effort with Tatum is a unique partnership that will provide a differentiated view of business trends - The Tatum/ Roulston Report.

To read the full survey click here.

Roulston Research Consultant to Appear on CNBC

Tune in to see Paul Ingrassia, Former President, Dow Jones Newswires, and member of Roulston Research's Consulting Team, on CNBC Wednesday, January 12 at 10:00 AM. Don't forget about our roundtable with Paul on January 27 at 2:00 PM in New York. If you want to attend or dial in contact Tom Roulston at 216-780-9581