#$twx

‘Middle-earth: Shadow of War’ will bring the Tolkien-inspired action to new heights.

The Eye of Sauron might see everything, but even the observant dark lord himself probably didn’t see “Middle-earth: Shadow of Mordor” coming.

The captivating open-world game was one of the best of 2014, breathing new life into Tolkien’s overexposed universe with tight combat, killer graphics and an innovative ‘Nemesis’ system that turned every no-good goblin into a diabolically unique snowflake.

It turns out, however, that “Mordor” was just the first chapter. For their next, Warner Bros. Interactive, owned by Time Warner (TWX), and developer Monolith are increasing the stakes exponentially. Due out Aug. 27 for PC, Xbox One and PS4, “Middle-earth: Shadow of War” aims to give gamers a bigger, badder and, based on a recently revealed gameplay trailer, significantly crazier Middle-earth to dominate.

Set immediately after the events of “Mordor” (and in between “The Hobbit” and “The Fellow of the Ring”), “Shadow of War” once again puts you in the vengeful boots of the ranger Talion and his wraith pal Celebrimbor. The specifics are still hush-hush — the game’s debut trailer shows off a new ring of power (“ring forger” was Celebrimbor’s gig before becoming an undead pain in the neck) — but suffice to say, the battle over Mordor is still raging.

“Shadow of War” hopes to harness that rage and expand it with a revamped Nemesis system. It will still generate charismatic enemies for you to contend with, but Nemesis will now reach past interpersonal drama and affect the shape of the whole gory game world.

Imposing, multi-leveled fortresses ruled by vicious Overlords control various regions. Orcs are now members of various warring tribes, the characteristics of which influence both individual overlords and, in turn, the regions themselves. A Beast Master overlord, for example, will result in a region teeming with wild beasts and orcish hunters.

‘Shadow of War’ will let you control your own orchish army.

That interplay between orcish bigwig and his environment includes the nature of each fortress. A war chief who favors fire could result in a fortress defended by flaming oil and explosive barrels.

To counter this, Talion leads his own army of converted baddies. You’ll use the new ring to raise your own war chiefs, each of whom will have specific abilities that may prove useful when taking down fortresses. An Olog-hai (the troll version of the Uruk-hai) war chief becomes a battering ram, able to break down doors with his giant, sturdy face. Infiltrate the enemy ranks with a sniper spy and they could turn the battle by taking down a challenging enemy.

The demo touched on a number of other awesome features, including a deeper gear and loot system, the ability to split up the ranger and wraith to tackle multiple enemies at once and, coolest of all, rideable dragons. Once again, for posterity: RIDEABLE DRAGONS.

It’s easy to be excited by the direction the franchise is heading, but the initial demo didn’t really break into the broader open-world gameplay. That was the real meat of “Mordor” — mounting caragors, scaling towers, bumping into gangs of orcs, hunting down hidden baubles — and while all of that stuff is likely in here, we don’t know yet what that all looks like. WB confirmed that the world is substantially bigger than “Mordor’s”, so I’m hoping we get some new traversal methods. Eagles, anyone?

We’ve got some time to find out. Expect more “Shadow of War” in the coming months.

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‘Resident Evil 7’ review: It’s a screaming good time

JANUARY 22, 2017

In 1789 George Washington was elected the first U.S. president. The United States' capital was New York City. He had to settle for the first presidential residence at 1 Cherry Street, since the Trump Tower up the road had not been built yet.

Those were the days when if you needed directions, you could reach in your pocket and instead of an iPhone, you could pull out your compass. Instead of an app you'd be using a map.

George Washington like Donald Trump was a part of his family's real estate business. It was The Ohio Company... 

The conglomerate's dilemma could unsettle investors and trigger activist action.

By Chris Nolter

With the $107 billion, including debt, purchase of Time Warner Inc. (TWX), AT&T Inc. (T) adds movie, TV and digital media to its portfolio of wireless, fiber and DirecTV satellite television services.

The move will broaden AT&T's holdings as other businesses plateau, and move it closer to Comcast Corp.'s (CMCSA) model. However, the new AT&T will encounter a common predicament for conglomerates: with diversity comes complexity. The merged companies will present Wall Street with a more complex bundle of assets and operations to value, and management with a large array of businesses and priorities to balance. That's just the kind of predicament that can unsettle investors and trigger activist action.

"For sheer size and complexity, it would be hard to describe the post-merger AT&T as anything other than a conglomerate." said MoffettNathanson LLC analyst Craig Moffett, in an email. "Giant companies often talk about synergies and benefits to scale, but history suggests that conglomerates trade at a discount precisely because the lack of focus and clarity of mission tends to lead to chronic underperformance."

Consider the old Time Warner. Just about a decade ago, Carl Icahn hired Lazard to produce a 371 page report arguing for the break-up of the New York media group. In addition to Warner Bros., HBO and Time Warner's other production businesses, the assets included AOL (acquired by Verizon Inc. (VZ)), Time Warner Cable (being acquired by Charter Communications Inc. (CHTR)) and Time Inc. (TIME) publishing (spun off).

To be fair, the old Time Warner was burdened with legacy media assets like print magazines and AOL's dial up Internet business, which had not yet developed the ad tech acumen that Tim Amstrong brought.

AT&T won't have the legacy AOL and Time properties. It will own its core landline and telecom businesses, recently acquired properties in Latin America, DirecTV and the entire Time Warner portfolio. "At some point it's hard to separate these businesses and really truly be able to value them," said Fitch analyst John Culver, who put AT&T on negative watch following the deal.

Investors are looking for the strategic path beyond diversification, Edward Jones analyst Dave Heger observed.

"People are still struggling with how do you strategically take this content and turn it into new services or new revenue streams," he said.

"There has been fear with cable channels, whether it is TBS or CNN, that overall pay TV subscriber levels have been dropping off," Heger added. "To what degree are those revenue streams at risk? How do you offset that with taking this content and monetizing it in other ways?"

Comcast provides a precedent for a vertically consolidated content production and distribution company. The company agreed to buy 51% of NBCUnversal from General Electric Co. (GE) in 2009, and closed the deal in 2011. Comcast rolled up the remainder in 2013, combining NBC's television network, the Universal studio and other assets with Comcast's leading cable TV systems and other properties.

(GE is held in Jim Cramer's charitable trust Action Alerts PLUS. See all of Cramer's holdings with a free trial.)

The Philadelphia media group is not a perfect comparison, however.

For one, Comcast paid 9 times projected Ebitda for NBCU in 2009, according to MoffettNathanson, while AT&T is paying 12.1 times projected Ebitda for 2017.

Comcast is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells CMCSA? Learn more now.

Moreover, Comcast made its bid for coming out of the recession. NBCUniversal was arguably a turnaround candidate. "A lot of potential value was probably hidden," Edward Jones's Heger said. "Comcast has had a lot of success improving the asset and driving a lot of value out of it."

The Time Warner deal comes at a different stage in the cycle. "The markets have had a big run and certainly Time Warner shares have reflected some of that." Heger said. "It's not like AT&T is getting the asset on the cheap."

(AT&T is held in the Dividend Stock Advisor portfolio. See all of the holdings with a free trial.)

While AT&T is paying up, CEO Randall Stephenson told investors Monday that Time Warner's free cash flow will improve its ability to pay its dividend, which Moody's project will grow from $12 billion a year to $14.5 billion. "The structure of the deal allows us to maintain a strong balance sheet and strong investment-grade credit metric," Stephenson said.

Time Warner CEO Jeff Bewkes said during the same call that innovations involving AT&T's distribution systems and Time Warner's content would provide growth. "We need to go where the consumers are going, and that's increasingly mobile, increasingly multi-platform, and it's increasingly on-demand through new services via direct consumer relationships over broadband, and this aligns us with all of that," Bewkes said.

T-Mobile USA Inc. (TMUS) CEO John Legere, a persistent antagonist of the Dallas telecom who was kicked out of an AT&T party at a trade conference in 2014, and Sprint Inc. (S) CEO Marcelo Claure predicted in respective earnings calls that the merger would distract AT&T from its wireless business, and allow them to take more subscribers.

If underperformance in the market or an imbalance in media and telecom valuations causes shareholders to agitate, AT&T will not have one of the protections that Comcast has. The family of Chairman and CEO Brian Roberts owns a controlling position on Comcast, which could deter an activist.

Each week Forcerank runs a variety of games covering different industries. What we have found, is that the lowest ranked companies in their respective games deliver the biggest negative price movement  for that week. This week the losers include Time Warner, Yelp, VMware, Evercore and Coach.

Time Warner (TWX) | Media: In the three weeks that Media game has been in existence, Time Warner’s average rank has progressively become worse. In the inaugural game, the cable provider garnered an average rank of 4.79 which then dropped to 5.31 and this week it holds down the bottom spot with an average user rank of 6.5. Since then, shares have dropped 3% and should continue to see greater declines. The stock is currently trading below its 20 and 50 day moving average combined with a negative MACD, spelling trouble for investors. Finally, share prices are still well above the volume profile, so a continued dip cannot be ruled out.

Yelp (YELP) | Social Media: Since bottoming out in February, shares of Yelp are up a resounding 160%. Despite the rebound, Yelp is still the worst ranked company in this week’s social media game, there is certainly a case to be made for a broad pullback. Conventional wisdom would suggest that such a large spike in a small amount of time is not sustainable. Closely watched technical indicators also support a dip on the horizon. There is still a very large gap yet to be filled just above $32 while an RSI of 63 is slightly reflective of an overbought stock.

VMware (VMW) | Most Heavily Shorted: For a second week, VMware was the worst ranked company in the most heavily shorted and large enterprise software contest. Shares are down  about 8% in the past 12 months driven by an ongoing slowdown in revenue growth. The stock has received a number of downgrades over this time, the most recent coming from Goldman Sachs at the start of September. The investment bank downgraded the stock from buy to neutral, similar to a move made by Citigroup a month earlier. Meanwhile, the company’s chart doesn’t do them any justice. There are multiple gaps below its current trading price that still need to be filled. Additionally, negative OBV and declining MACD support a downturn on the horizon.

Evercore (EVR) | Financials: This week, Evercore replaces Wells Fargo as the worst stock in the financial contest. The biggest news from this investment bank is the recent departure of its head of quant research. Shares are down nearly 2.5% in Monday morning trading and 6% year to date. Additionally, the company is trading below its 20 and 50 day moving average.

Coach (COH) | Apparel: Coach shares are down nearly 11% year to date after multiple quarters of weak quarterly earnings. Two weeks ago the stock was downgraded by Morgan Stanley to Underweight from Equal Weight. Luxury brands like Coach haven’t translated well in this current retail environment where discounters are king. Frequent discounts and growing outlet stores have kept sales afloat but have severely hampered margins. Meanwhile a bearish crossover of its 200 day average above its 20 day average is sign of near term weakness. The saving grace in Coach’s freefall is that it appears to be oversold, which means a reversal could be near.  

Click here to play now and gain actionable insights.

Photo Credit: Shakapam

Source: Netlfix, Amazon

Is Apple running out of ideas or is there more at work? Reports indicate that Apple plans to slow the update cycle of the iPhone, but while such news may frighten product-driven investors, it may counter-intuitively help the market re-focus on assessing Apple’s intrinsic value as opposed to encouraging product-driven trading. Of course we’d like to see Apple continue on its breakneck innovation curve, but we’re not disappointed in the expected lull either, nor are we taken aback by Apple’s rumored interest in Netflix, a scenario we find considerably far-fetched.

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By Brian Nelson, CFA

Have we finally reached the limits when it comes to enhancing the functionality of the smartphone?

Many are speculating this to be true, if Apple’s (AAPL) decision to now “take three years between full-model changes of its iPhone devices, a year longer than the current cycle,” is true, as reported by the Nikkei Asian Review May 31. The report comes a mere month after Apple’s first-quarter internal unit sales metrics left much to be desired, “Apple: Nowhere To Run, Nowhere To Hide (April 2016),” where unit sales of the iPhone dropped 16% and where iPad performance was even worse. A logical read-through from the news of a more prolonged update cycle may be that the iPhone is now “old tech,” but perhaps it may also be the case that two-year full-model revamps are no longer required to capture each and every consumer upgrade. There are a large number of Apple die-hards, for example, that aren’t even on the latest version, me included. I’m still sporting the iPhone 5, and I’ll be getting the latest and greatest Apple phone, whichever it may be, when it’s time.

Others are logically assuming that Apple is starting to become a victim of its own success, if such a claim hasn’t already been stated for much of the past year. Nobody will argue that the pace of Apple’s innovation has been phenomenal with respect to the iPhone, and to a large degree, it then isn’t too far of a stretch to assume that massive future changes to the platform just don’t fit market need. How bad could this news really be? The prospect of a slowing iPhone upgrade cycle has been rumored for some time and perhaps had been weighing on the stock more than anything else, at least in our view. Just last week though, Taiwan’s Economic Daily News reported that Apple is looking to produce as many as 72-78 million iPhone 7 units in 2017, “a record figure for a new iPhone and above analyst estimates of ~65 million.” Given the apparent conflicting information, one thing is clear: even if the pace of iPhone overhauls slow, the gadget remains in considerable demand.

We had written in January our view that Apple “will be ‘forced’ into acquisitions” as organic growth comes under pressure, but we didn’t think that anyone in the Apple executive suite would be considering Netflix (NFLX), which continues to trade at an extremely bloated valuation. Netflix’s competitive advantage stems from its domestic brand recognition and the barriers to entry to building a vast collection of fascinating video content, but to the new subscriber interested in movies, the company’s library isn’t all that impressive, “5 Reasons Why We Think Netflix’s Shares Will Collapse (February 2016).” We wrote how Netflix is beginning to implode on the basis of management’s expectations of a slowdown in the pace of new adds in both the US and internationally, the latter we view unacceptable in light of the long-term targets implied by its share price.

Netflix’s intrinsic value is based on its steady-state performance of the company and its free cash flow over the long haul, and we believe the market continues to vastly overestimate the long-term economics of its international business, both potential full-penetration numbers as well as the hefty costs (shareholder capital) needed to reach peak subscribers. Why Netflix wants to use the debt markets to fund growth instead of raising as much equity capital “up here” is beyond us. But no matter your opinion on Netflix,rumors are flying that it and Time Warner (TWX) are takeover targets as the iPhone maker is said to be seeking a solution to its “content problem.” It doesn’t take but one “believable” rumor to send shares of Netflix higher on speculation.

We doubt Apple is interested in purchasing a digital streaming website that is becoming more and more tied to its very own hit-or-miss content, and we find it very difficult to believe that CEO Tim Cook could justify Netflix’s ~$45 billion price tag in light of its deteriorating growth metrics, negative free cash flow, and an impending massive investment cycle to grow its international business, profits outside the US still elusive. But even if Apple is interested, the company shouldn’t be in any hurry. It has time to wait for Netflix’s shares to come back down to reality, and there are at least three catalysts that can cause this to happen: 1) general market malaise that punishes high-beta names disproportionately, 2) the market’s realization of Netflix’s unattainable, frothy international growth targets and the magnitude of investment needed as it strives to achieve them, or 3) the implications of the pricing war just launched by Amazon’s (AMZN) Prime service, where video is now a standalone option at $8.99/month – a dollar less than Netflix’s recently-raised price on its most popular plan.

Logical investors may be asking the question: If consumers can get everything from Amazon by subscription for $99 year, including original video content, deliveries and more, why do they need Netflix? Unless Netflix wants to start delivering diapers and paper towels to consumers’ doorsteps, it’s going to have a hard time competing with Amazon’s significantly more comprehensive suite of offerings that hit almost every aspect of our daily lives. We believe the Netflix fallout is inevitable, in our view, and any buyout that Netflix shareholders are hoping for may turn into a “buy-under” in coming years as reality sets in. Apple would be wise to stay away from the Amazon-Netflix fight, as neither will win, with the only beneficiary the consumer through ever-lower prices as both destroy economic value in a quest for growth. We're not buying the Apple-Netflix tie-up.

Interested in reading more about our work on Apple, Amazon, and Netflix, visit us at www.valuentum.com. 

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Forget the rumors that Tim Cook is keen on the content giants, as either would go against Apple's playbook.     

by Chris Nolter

Given Apple Inc.'s (AAPL) $233 billion cash stockpile and the growing competition for video content, speculation linking the company to Netflix Inc. (NFLX) or Time Warner Inc. (TWX) seems only natural.

Shares of the companies, especially Netflix, surged on Thursday after the Financial Times reported talks between Apple and Time Warner and suggested that Apple CEO Tim Cook should take a look at Netflix. On Tuesday morning, shares of both Apple and Netflix were down slightly, while Time Warner shares edged up.

Such potentially expensive deals don't match up with Apple's M&A history and strategy, however.

For starters, Apple has not bought big companies in the past and Reed Hastings' streaming service has a market cap well above $40 billion.

"While at one point this might have been a good idea it has moved way too high for Apple to consider it," Jim Cramer, founder of The Deal's parent, TheStreet, and manager of the Action Alerts PLUS portfolio, which owns AAPL.

Furthermore, Tim Cook might find more efficient uses for the cash if Apple built its own streaming business.

"If Apple launched this service and gave it way for free for a year how many defectors would Netflix have?" Moody's Investors Service analyst Gerald Granovsky said. "That would cost less than $40 billion."

Apple has typically paid $50 million to $200 million for acquisitions, Granovsky noted. "It has bought product lines, it has bought IP, it has bought the capability to enhance its current or future products," the Moody's analyst said.

Dr. Dre's Beats, which Apple acquired for $3 billion in 2014, was an anomaly.

"Beats was one of the few companies that had real revenues with very good gross profit margins," Granovsky said. "The headphones business pays for the acquisition  in three years or so."

While the valuation of Netflix dwarfs the price tag for Beats, Christian Renaud of research firm 451 Research said that isn't the only potential snag to a deal.

"This seems to be inconsistent with what they've done with video and iTunes and that ecosystem they put together," he said. "Streaming is taking over. However Apple has really defined the other path, which is rentals and purchases via the iTunes store."

Already-tense relations between content creators and Apple and Netflix could also get worse after a merger, he noted. Media companies could push for regulatory scrutiny of a transaction.

Much of Apple's cash is overseas, Renaud said, and would be taxed if repatriated for purchase. It would also be cheaper for the company to raise debt for a purchase.

"I's unlikely," Renaud said of an Apple-Netflix combination. "It's not impossible."

After all, Apple, which declined to comment for this story, certainly has the resources to buy Netflix. And the halo that long shone above the Cupertino, Calif, company is not as bright as it used to be.

"Tim's gotten a lot of criticism for not really moving the needle and being as disruptive as Jobs was," Renaud said. "Maybe his way to fix that is to buy his way out of the problem. You never know."

Time Warner, with a nearly $60 billion equity valuation, would also be problematic. Apple's video business involves deals with an array of media groups. "It doesn't make sense for Apple to buy one content owner, if their goal is to remain the Switzerland of content across all of its platforms and not disenfranchise anyone else," Granovsky said.

While buying Time Warner, which owns the valuable HBO network, would contradict Apple's playbook, it makes sense that teams within the tech and media giants have had talks.

After a 4 year uptrend that saw Disney add over $100b in shareholder value, the stock seems to finally be hitting some real turbulence: 

Good news: A beloved brand owns a dominant franchise

One thing is certain -- Disney did very, very well with its debut as the owner of the Star Wars franchise.  $2.1 billion in global box office sales and counting, which propelled the company to its largest quarter in history -- over $15 billion in revenues and profits that topped analyst estimates.

In fact, you can see this dominance on display in social media, with Star Wars related mentions outpacing the rest of Disney brands and products by a mile:

Data from TD Ameritrade’s Social Signals tab

It’s worth noting that despite making up the biggest part of Disney’s enterprise value, theme parks run a distant fifth behind other entertainment options when it comes to what people are talking about online.

Bad News:  It’s all about ESPN now

We all know Mickey Mouse loves sports, but investors are getting a little tired of watching ESPN lose subscribers as more and more families are cutting the cord and canceling their Time Warner or Comcast cable subscription.

The post-earnings selloff that Disney is experiencing is almost purely driven by concerns over its ESPN unit, with investors noting that while Star Wars revenues are fantastic, they can only be counted on every 2-3 years when a new movie comes out.  

Others see light at the end of the ESPN tunnel with over-the top streaming and mobile distribution.  In fact, many like this tweet from Ross Gerber have taken to social media today to defend the company against what seems to be an exaggerated take on ESPN’s woes:

The best way to play Disney from here...

LikeFolio data on Disney brands has been slipping since last fall, especially when you “normalize” for the Star Wars release in December.  That gives us reason to believe that despite Disney’s incredible entertainment machine, there is only so much upside that Disney stock can achieve from here.

Coatue Management Llc returns an estimated -6.63% for January 2016 - the fully hedged version returns -0.25%

Coatue Management Llc generated a -6.63% return on their publicly disclosed long portfolio for the month ending January 2016, underperforming the S&P500 by 664 basis points (bp). On a hedged basis, the portfolio would have returned -0.25% StockAlpha over the same period. Coatue's StockAlpha reflects the return of the net return if each security in their portfolio was hedged with a sector ETF, such that the resulting portfolio was market, beta and sector neutral. StockAlpha in the Cons. Disc. sector contributed the most to StockAlpha during the month.

Positive Contributors to Coatue's Returns

Coatue’s position in Time Warner Inc. (TWX) contributed the most to the performance of the manager’s long-portfolio during the month. Over the month of January 2016, Coatue's 2.4% position in Time Warner Inc. (TWX) increased in value by 10.1%, contributing 0.24% (2.4%*10.1%=0.24%)to the long portfolios overall return. Looking at Coatue's portfolio through a fully hedged StockAlpha lens, the holding of Time Warner Inc. (TWX) also provided the largest contribution to fully hedged returns. Time Warner Inc. (TWX) returned 10.1% during the month compared to the Cons. Disc. sector, which returned -5.8%. As a result, after taking into account Time Warner Inc. (TWX)'s beta relative to its sector, the position contributed 0.4% of StockAlpha to the Coatue’s monthly performance.

Negative Contributors to Coatue's Returns

Much of the drag on Coatue’s long-portfolio during the month can be attributed to the holding of Avago Technologies Limited (AVGO). Over the month of January 2016, the manager's 6.1% position in Avago Technologies Limited (AVGO) returned -11.7%, contributing -0.71% (6.1%*-11.7%=-0.71%)to the long portfolios overall return. Looking at Coatue's portfolio through a fully hedged StockAlpha lens, the holding of JD.COM INC ADR (JD) provided the most negative contribution to fully hedged returns. JD.COM INC ADR (JD) returned -14.4% during the month compared to the Consumer Discretionary sector, which returned -5.8%. As a result, the position contributed -0.5% of StockAlpha to the manager’s monthly performance.

Overlap with other hedge funds