Looking for Signs That Apple’s Runaway Growth Is Waning

Looking for Signs That Apple's Runaway Growth Is Waning

Investors have long relied on Apple to deliver one crucial attribute: growth. Now they are beginning to wonder whether Apple’s days as a growth stock are coming to an end.

With sales increases of Apple’s prime product, the iPhone, projected to decelerate, and no clear new blockbuster device on the horizon, the era of the company’s producing 50 or 60 percent annual revenue growth may be on the wane. When Apple reports earnings Tuesday, investors will be scouring the results for signs of how fast that downshift is happening.

Already, some investors have begun to treat Apple in a new way: as a “value” stock, a label typically attached to companies that generate predictable business results or a reliable dividend, rather than ones that deliver runaway revenue growth. Value stocks often command much lower valuations than growth stocks.

“People were in love with Apple because hits like the iPod and iPhone created phenomenal growth,” said Ernesto Ramos, a fund manager at BMO Global Asset Management, which manages $18 billion and counts Apple as its largest holding. “As investors shifted their minds around the fact that it’s no longer going to deliver the same sort of huge growth over the next five years, the stock became a value play.”

Ramos says his firm still owns Apple in some of its growth funds, but it began including the stock in value funds in mid-2013.

The change has important implications for Apple. While a technology-sector company like Netflix is regarded as a growth stock because its revenue grew 22.8 percent in the most recent quarter from the previous year, value stocks include aging tech giants like Cisco, Oracle and Intel. Being lumped in with those behemoths would be a perception shift for Apple.

Beyond that, switching from being a growth stock to being a value stock can be a long and painful process. Growth investors need to sell a company’s shares and drive down the price until it is low enough to tempt value investors, who buy stocks they think are cheap compared with the intrinsic value of the company. In the tech industry, a shift from growth to value also often signals to investors that a company is facing newer competitors with more innovative products, raising the question of how relevant the company can remain.

“Investors don’t like to see the words tech and value combined because when growth slows at a tech company, it usually means that something essentially is not working,” said Angelo Zino, a senior analyst at the research firm S&P Capital IQ.

A spokeswoman for Apple declined to comment.

Any change would have repercussions beyond Apple because its soaring performance in recent years helped lift the broader market. If Apple shares were removed from the equation, the performance of the Standard & Poor’s 500-stock index in five of the last seven years would drop by about 1 percentage point, according to data from S&P Dow Jones Indices. In 2014, for instance, the index rose 13.7 percent with Apple and 12.9 percent without Apple.

The Apple effect is even more pronounced when technology names are isolated. For tech stocks on the S&P 500 as a group, annual gain in 2009 declined by 6 percentage points when Apple shares were not included, dropping to 56 percent from 62 percent.

Apple’s effect became more muted last year as the company’s growth decelerated, according to the data.

Investors have turned to Facebook, Amazon, Netflix and Alphabet, which owns Google – collectively referred to as the FANG stocks – for growth. Those companies are each expected to show annual revenue gains of 23 to 40 percent for the last three months of 2015, while Apple is projected to deliver 3 percent revenue growth, according to Bloomberg data.

Ramos says companies like Amazon have bigger growth potential for his fund than Apple, though he plans to continue owning shares in the iPhone maker.

“Amazon will see about 20 percent revenue growth, and earnings per share are expected to jump considerably,” he said. “This is a very strong growth story.”

Apple’s shares have already been buffeted in recent months because of worries about the slowing economy in China, which the company counts as one of its largest markets. Half a dozen companies that provide parts for the iPhone also blamed weak demand from Apple for lower-than-expected earnings, causing worries about the company’s sales trajectory.

In total, Apple shares fell 4.7 percent in 2015. So far this year, they are down 3.7 percent, while the S&P 500 is down 6.7 percent. Alphabet is now within spitting distance of overtaking Apple as the world’s biggest company by market capitalization.

“If you wanted to outperform the market, the FANG stocks did better,” said Jonathan Krinsky, an analyst at the research and trading firm MKM Partners, though he added that Apple remained a must-watch stock because it composed such a large part of many stock indexes.

Investors may still someday reanoint Apple as a growth stock, especially if the company can create a best-selling new product that drives up its sales rate. Wall Street analysts cite Microsoft as an example of a business that lost steam and then made the adjustments necessary to deliver strong revenue growth again.

And Apple may have some product aces up its sleeve. The company entered wearable computing last year with the Apple Watch. Apple is also trying to become a dominant software platform in the auto industry and is working on a car. (An executive who was overseeing the car project, Steve Zadesky, is leaving the company for personal reasons, according to a person with knowledge of the matter, who asked to remain anonymous because the details are private. The Wall Street Journal earlier reported on the departure.)

Apple has been reclassified as a value stock before. FTSE Russell, which makes several closely followed stock indexes, found in 2013 that Apple no longer met its criteria to be treated purely as a growth stock. Some of the company’s enormous market capitalization was reallocated to the Russell Value Index, as well as being in the Russell Growth Index. A year later, when the company’s sales had risen strongly with the introduction of the iPhone 6, FTSE Russell placed Apple solely back in the growth index.

Tom Goodwin, FTSE Russell’s senior research director, said that stock price, sales growth and analyst expectations determine whether a company is placed in the growth or value index, or in both. About a third of the stocks that Russell tracks are included in both indexes, he said.

But until Apple reveals another hit or shows a significant pickup in iPhone sales growth, Apple should be viewed as a value-oriented name, said Zino of S&P Capital IQ.

“Historically Apple was the name to own if you wanted to outperform the market,” he said. “Now there are other places to look.”

[“Source-Gadgets”]

People Keep Going to This Home Looking for Their Lost Phones – and Nobody Knows Why

People Keep Going to This Home Looking for Their Lost Phones - and Nobody Knows Why

For months now, angry strangers have been showing up at Christina Lee and Michael Saba’s front door with a curious demand: “Give me back my stolen phone!”

Sometimes, families will show up; other times, it’s groups of friends or a random person with a police officer in tow, according to Fusion. Despite using different service providers, everyone who bangs on their door has been led to the suburban Atlanta home by a phone-tracking app.

The problem – as the couple desperately tries to explain visitors – is that the missing phones aren’t at the house and never have been.

They are not, in fact, thieves. Saba is an engineer; Lee is a journalist.

The pair doesn’t understand why exactly, but both Android and iPhone users on various networks are being directed to their house by phone-tracking apps.

Once the awkward situation is explained, most lost-phone-seekers are understanding. But the couple told Fusion that a smaller number of people who place absolute faith in their tracking technology are convinced that the couple is lying, provoking potentially volatile conflicts.

“My biggest fear is that someone dangerous or violent is going to visit our house because of this,” Saba told Fusion by email. “If or when that happens, I doubt our polite explanations are gonna go very far.”

“The majority of incidents happen later at night, after dinner,” Lee told the BBC, noting that neither she nor Saba have an idea why the problem persists.

On several occasions, Fusion reports, the problem has led to serious misunderstandings, such as an incident in which the couple briefly became suspects in a missing persons case:

In June, the police came looking for a teenage girl whose parents reported her missing. The police made Lee and Saba sit outside for more than an hour while the police decided whether they should get a warrant to search the house for the girl’s phone, and presumably, the girl. When Saba asked if he could go back inside to use the bathroom, the police wouldn’t let him.

On a separate occasion, Lee told the BBC, three “frantic” young men showed up outside their door looking for someone.

“The minute Michael opened the door they were, ‘like where is he?'” she said.

So why is it happening? So far, nobody is entirely sure; but several theories have been floated by experts.

To grasp the problem, it helps to rewind history to the mid-1990s, when cellphone companies were forced to create a way to locate cellular devices so that their coordinates could be sent to police dispatchers. At the time – as the Las VegasReview-Journal reported in 2013 – a growing number of calls to police were occurring via cell phone and authorities needed a way to accurately locate the callers.

Nearly two decades later, a recent USA Today investigation revealed, the number of calls to dispatchers from cell phones has increased to 70 percent; but in many cities around the country, the technology has not always kept pace.

The ubiquity of the technology may leave the impression that location tracking is always reliable, experts say.

Alan Woodward, a cyber-security expert from Surrey University, told the BBC that trackers rely on GPS, which isn’t available in many locations.

Without GPS, he noted, phone trackers rely on a less accurate process of determining location known as “triangulation.”

“All triangulation does is draw a line equidistant between three cell towers and if your house is on that line you’ll get visits,” Woodward said. “I don’t have enough data to know exactly what’s going on but I wouldn’t be at all surprised [if it was a triangulation error].”

In instances where triangulation doesn’t work, a tracker will attempt to use the “the last known wi-fi signal the device found,” according to the BBC.

Ian Williams, a security consultant from Pentest Partners, told the BBC that the problem may arise during this crucial step in the location process. He noted that a moved or stolen wi-fi router may still be “registered as being in the vicinity” of the home.

“I have actually seen a person’s location data hop around a map where a router has been relocated due to a house move and before the databases of the routers location have had the chance to be updated,” he said.

A similar problem plagued a 59-year-old man named Wayne Dobson, who started receiving unwanted visitors looking for their missing phones at his Las Vegas home in 2011, according to the Review-Journal.

“I’m standing there and I’m thinking, ‘What are they talking about?’ ” he told the paper. “They might as well have said, ‘Give me my horse back.'”

The people pestering Dobson were all Sprint users, the paper reported. By 2013, they were still showing up at all hours of the day. Dobson was also searched by police on one occasion and narrowly avoided several other conflicts with strangers. Eventually, he told the Review-Journal, he began to fear for his safety and his domestic life began to deteriorate.

“It’s very difficult to say, ‘I don’t have your phone,’ in any other way other than, ‘I don’t have your phone,’ ” Dobson told the paper.

“It’s a hell of a problem,” he added. “It would be nice to be able to get a good night’s sleep.”

Sprint eventually located the problem and apologized to Dobson, according to the Verge.

Despite similar circumstances, Saba and Lee have not been so lucky.

They told Fusion that their home is near three cell towers, the closest of which is belongs to T-Mobile. Efforts to reach out to the company as well as Google and Apple seeking help yielded no assistance, Fusion reported. The publication even reached out to the Federal Communications Commission “the agency in charge of regulating wireless devices,” according to Fusion but were told the issue didn’t fall under their control.

The couple plan to file a complaint with the FCC and their senator.

Moving isn’t an option, they told Fusion, because Lee’s parents own the home.

“Public pressure is how stuff like this changes,” Saba told Fusion. “It sucks that it happens to us, but I hope our experience will lead to it not happening to anyone else.”

[“Source-Gadgets”]

Why 3D Video Games Might Actually Be Good for Your Child

Why 3D Video Games Might Actually Be Good for Your Child

The late film critic Roger Ebert famously declared that video games could never be art, much to the outrage of die-hard gamers everywhere. While the artistic value of classics like ‘Portal’ or ‘Doom’ continues to be a matter of debate, another group of skeptics about the value of video games – namely medical researchers – are starting to come around to the idea that becoming engrossed in the virtual world of a video game may have value beyond pure fun.

Recent research in the fields of neuroscience, psychology and cognitive science has found evidence that playing certain video games can be like exercise for the brain.

Studies from the past decade have found that individuals who frequently play action games like first-person shooters outperform non-gamers on a variety of perceptual and cognitive measures – visual acuity, decision-making, object tracking, and task switching to name a few. Even players of casual video games, such as ‘Bejeweled Blitz’ or ‘Candy Crush Saga,’ report memory improvements and quicker response time as a result.

Now, researchers have discovered that playing 3D video games – those that immerse the player in a three-dimensional world with a more true-to-life, first-person perspective – may boost memory and stimulate the brain.

A new study published this month in the Journal of Neuroscience, trained college students with either a simple 2D game (‘Angry Birds’) or an intricate 3D game (‘Super Mario 3D World’). The subjects had little to no experience with video games before the experiment, and were instructed to play for a half-hour per day for two weeks. After the training period, the groups took memory tests designed to activate the brain’s hippocampus, which is highly involved in the formation of new memories and becomes stimulated when navigating an unfamiliar environment.

“It’s sometimes called explicit or declarative memory, but what it really comes down to is your ability to remember details of things that have happened to you – and that’s where the hippocampus comes in,” said study author Craig Stark, professor of neurobiology and behavior at the University of California at Irvine.

For instance, structural MRI studies have found significantly larger cortical volume in the posterior hippocampi of London cab drivers – individuals with extensive navigation experience with first-hand knowledge of tens of thousands of streets – relative to control subjects. Stark and his colleagues wanted to determine whether exploration of a virtual world would lead to similar effects in the hippocampus through the use of a 3D video game.

The group that played ‘Super Mario 3D World’ improved their scores by about 12 percent after the two-week training, with performance correlating with the amount of exploration achieved in the game’s environment, while the 2D ‘Angry Birds’ cohort showed no significant progress. To get an idea of the magnitude of this boost, a typical score on these memory tasks has been seen to drop the same amount from ages 45 to 70.

“The amount that we were able to boost people’s memory performance by playing video games represents about 20 to 30 years of cognitive decline,” Stark explained in an interview. “But it would be the sort of thing that would require constant maintenance, like going to the gym. If you work out really hard for a month, that’s great – but it won’t last the rest of your life.”

Indeed, after two weeks of no gaming, the boost in memory performance seen in 3D gamers had already started to dissipate. But Stark, whose research focuses on how the circuitry of the hippocampus changes with age, plans to further investigate how video games and other stimulating, enriching experiences can help ward off cognitive aging in an older population whose memory is on the decline.

“I don’t necessarily think there’s anything magical about 3D games themselves,” he said. “I think they’re tapping into a lot of things – they’re complex, fun, engaging and immersive – and I think that’s what is really driving [the improvements in memory].”

While specific brain training games do exist to supposedly build up memory or concentration, Stark believes that more broad-spectrum approaches like complex video games, language classes, or even traveling abroad, may be more beneficial for brain health. Living a “cognitively engaged lifestyle” as he calls it, that also captivates our imagination and sense of wonder is a natural way to draw on a number of different brain processes and potentially improve functioning as a result.

[“Source-Gadgets”]

Message Apps Pose Growing Risk for China Securities Regulator

Message Apps Pose Growing Risk for China Securities Regulator

A growing number of China’s retail investors are opening trading accounts on messaging and social media app WeChat, and some institutional investors are even using it to instruct brokers, making it harder for regulators to monitor trades and spot illegal activity, traders and investors told Reuters.

While using mobile messaging and social media apps for trading is not unlawful in China, regulations require reliable monitoring and recording of trades to prevent activities such as insider trading or market manipulation, and to keep on top of threats to market stability such as excessive margin trading.

China Securities Regulatory Commission (CSRC) has been clamping down on breaches, including fining four brokerages in September for failing to collect information about the identities of clients who traded stocks through external systems.

It also shut down third-party trading software used by brokers that helped traders skirt regulations by dividing one account into many sub-accounts without the need to register a name, according to local media.

Even so, using apps to buy and sell stocks over mobile phones is common in a country where retail investors account for 80 percent of share market volume.

Despite closer scrutiny from China’s regulators, brokerages including large listed firms like China Galaxy Securities and smaller entities such as Great Wall Securities, started offering WeChat share trading account services last year in a bid to access the growing pool of retail traders.

China Galaxy Securities and Great Wall Securities did not return requests for comment.

Overall account openings swelled to around 46 million in the first half of 2015, from around 2 million over the same period in 2014, according to official data.

For brokers, the advantages of using WeChat are obvious, since it is the preferred means of communication for many of its 600 million users.

But a case in Hong Kong last month highlights regulators’ concerns with the trend.

The regulator there suspended a trader for receiving a buy order on WhatsApp, a messaging app owned by Facebook Inc , in breach of the internal communication policies of the firm he then worked for, BTIG, noting that the company had no control over the recording and retention of such messages.

Growing risks
While the Hong Kong Securities and Futures Commission code of conduct does not prohibit the use of social messaging apps, it encourages the strict recording and time stamping of all communications and says the use of mobile phones for orders is “strongly discouraged”.

Some of China’s institutional investors are also using WeChat to instruct their brokers.

“In practice lots of people don’t care about compliance and take orders on WeChat,” said a Hong Kong-based institutional sales trader specialising in China.

The CSRC did not respond to requests for comment, nor did Tencent Holdings Ltd, the owner of WeChat.

Such concerns are not limited to China.

Clara Shih, chief executive and founder of Hearsay Social, Inc, a San Francisco-based social media compliance company, said messaging apps are also a potential gap in the compliance systems that US financial services firms have spent years building.

US brokerages must monitor and store copies of employees’ electronic communications for three years and have a duty to protect clients’ personal information and confidentiality, tasks made more complicated by the proliferation of social media platforms.

Technology has evolved in recent years to make it easier for companies to monitor employees’ activity on traditional social media platforms such as Facebook and Twitter. But WhatsApp and WeChat are not compatible with that technology, Shih said.

Using social media for business is a growing trend but also a growing risk for compliance, said Craig Brauff, chief executive of Erado, a social media compliance company in Renton, Washington.

“Regulations are designed to keep honest people honest. If someone really wants to be dishonest, there are lots of ways around it,” he said.

[“Source-Gadgets”]