【時報記者何美如台北報導】智慧型手機今年成長幅度高於市場預期，研究機構多預估，明年全球銷售量將逾4億支，滲透率攀至27.59%，市場也期待，平價化趨勢有助品牌廠釋出代工訂單，明年ODM廠業績表現值得期待。不過，智慧型手機ODM訂單真是代工廠的獲利萬靈丹？從已投入智慧型手機ODM的華寶 (8078) 、華冠 (8101) 、英華達 (3367) 、英業達 (2356) 等來看，在龐大研發費用投入下，似乎沒嚐到甜頭，華寶今年更呈現虧損。
【時報記者任珮云台北報導】全球最大規模的筆記本電腦鍵盤及滑鼠生產商精元 (2387) 電腦在璧山的工廠已經投產，開始為重慶供貨。精元鍵盤產能在全球電腦鍵盤市場占了約40%的，占了全球筆記本電腦鍵盤市場的60%。精元重慶工廠10月底就開始試生產，現在已開通4條生產線，目前訂單主要來自富士康。同時，精元電腦已與英業達 (2356) 簽訂協議，從11月開始供貨。據悉，精元電腦在重慶拿到的訂單生產計畫，已排到明年第一季。
精元 (2387) 11月合併營收11億元，月減7.9%，法人估計，單月稅前盈餘約1.48億元，月增約13%，每股盈餘0.4元，累計前11月稅前盈餘15.7億元，年增率36%，每股盈餘4.16元。受到整體NB產業旺季不旺影響，法人估精元第四季出貨量將略低於上季，精元第三季出貨量逾1760萬片，估計整體全年NB鍵盤出貨量可超過7000萬片，較去年同期成長近兩成，再寫新高紀錄。
I wonder if there will be a flurry of last-minute gift subscriptions to Netflix this Christmas.
After all, it's a gift you can buy online, so you can get it as late as Christmas morning for that surprise guest. It doesn't cost much: Prices start at $7.99 a month. And Netflix, which delivers TV programs and movies to your home by DVD and over the Internet, can save the recipient money: It lets them cut back on cable—or dump it altogether.
These are boom times for Netflix. It's been one of the big winners from the recession. Last quarter's revenues were 31% higher than a year earlier. Earnings were up 35% and had doubled since the summer of 2008.
In the last year alone, the stock has rocketed from $57 to $184. By my rough calculations, based upon filings from earlier this year, chairman and chief executive Reed Hastings may be sitting on stock-option gains approaching $300 million.
So if the Netflix subscription service is a good deal, is that the same for the stock?
I'm sorry to sound like a Grinch, but that's another story.
There are three things that should make you nervous about any stock.
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These are boom times for Netflix. But is the share price set for a fall?
First: It becomes extremely expensive in relation to earnings.
Second: The CEO gets named "businessman of the year."
Third: The CEO starts arguing in public with hedge-fund managers who are betting against his stock.
In the case of Netflix, I'm afraid, we have all three.
It was bad enough that Reed Hastings was named "Businessperson of the Year" by Fortune. It's uncanny how often this sort of thing precedes a very nasty fall.
Then Mr. Hastings got into a public debate with Whitney Tilson, a hedge-fund manager who is "short," or betting against, Netflix stock.
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Mr. Tilson laid out a strong bear case on Netflix. A few days later Mr. Hastings hit back.
This is never a good sign. I remember watching Overstock.com Chief Executive Patrick Byrne rage against short-sellers while his stock tanked. The only correct way for a chief executive to handle the bears is to make them lose money by keeping the share price rising.
Perhaps none of this would be quite so ominous if Netflix stock weren't so expensive. The stock is trading at a lofty 70 times recent earnings, and 48 times those forecast for the next 12 months. It trades at nearly five times annual sales. These are extremely high multiples.
At these levels, it gets tough for an investor to make a good return. Companies have to run faster and faster just to meet expectations.
The history of the stock market is not kind to investors who pay too much for growth stocks. Over the long haul, study after study has shown that they tend on average to fare poorly. For each winning stock, there are many costly losers. Indeed, some analyses—such as work done by James Montier, now a strategist at fund shop GMO—argue that investors have typically done better investing in the beaten-down stocks that everyone hates than they have in the glamorous ones everyone loves.
That's because unloved stocks tend to be so cheap, and expectations so low, that positive surprises can come quite easily. With go-go glamour stocks, the reverse is true. Even a single disappointment can get punished severely.
I'm a great admirer of successful, entrepreneurial companies—especially those, like Netflix, that seem to have their act together, have reinvented an industry, and have knocked the stuffing out of complacent old behemoths like Blockbuster.
Netflix has built a great franchise. But right now the stock market may be viewing this company's future upside-down.
Yes, the big news is that the business is moving from delivering DVDs by mail, its established model, to streaming movies over the Internet.
Wall Street sees new vistas of growth. I see much more competition. I also see a game where Netflix's key strengths suddenly won't count for very much.
Consider the competition. Everyone and his aunt is getting into the streaming game. It's not just the cable companies.
An Apple TV lets you rent individual movies for $3 to $4 at a time, and TV programs for a dollar. You can rent movies online from Amazon.com. You can buy set-top boxes—from the likes of Roku and Boxee—that let you stream media from different sources. You can watch programs from the Web on Google TV.
These are early days for this industry. It's really just getting going.
And where will Netflix have an advantage? Will they get better deals from movie studios and TV companies than Apple, Google, Hulu or Amazon? If so, why? If I want to download, say, "Harry Potter and the Deathly Hallows"—or "Casablanca"—why should I go to Netflix.com rather than anywhere else?
If the free market works as advertised, this should end up as a low-margin business. Indeed, it may end up as a negative-margin business: If history is any guide, some companies will be willing to sell at a loss to gain market share, and there will be investors willing to finance them, at least for a while. Bring on the deals! Do I really want to pay 45 times forecast earnings to be in this business right here?
Now consider how this new world of online video streaming will neutralize two of Netflix's core strengths.
The first: fulfillment. Netflix doesn't owe its success to an amazing website. It owes it to the remarkably efficient way it handles lots of DVDs. It sends out orders and processes returns quickly. It doesn't make a lot of mistakes or lose many discs. This is tougher than it seems. Most companies can't do it. Netflix, like Amazon, can. It's why Netflix is the champ at mail-order DVD rental.
But this skill is irrelevant to streaming movies. It gives you no edge at all.
The second big change? Under its current business model, Netflix is able to rent the same DVD over and over to different customers. That's extremely lucrative.
But with streaming, all that changes as well. You have to strike deals with studios and TV companies. They can charge you for each use. You lose control, and your edge.
None of this means it's lights out for Netflix. Never underestimate a well-run entrepreneurial company. Maybe it will defy the odds. Maybe the stock will keep rising. But the game is different, and getting harder.
So what should you do if you own Netflix shares? Knowing when to sell a booming stock—if at all—is always tricky. There are no perfect answers, but one of the better ideas I've seen is simply to set up a stop-loss order. Set a price target, maybe 20% below the peak, and if the stock falls to that level, cash out. It won't get you out at the top. But it will keep you in a rising stock and can cash you out of a falling one before things get really bad.
Write to Brett Arends at firstname.lastname@example.org
By DON CLARK
Chip makers soon will deliver one of biggest advances in years in the technology that powers laptop and desktop computers. But how much consumers—and the chip companies—will benefit is in question.
Chip makers soon will deliver one of biggest advances in years in the technology that powers laptop and desktop computers. But how much it will benefit consumers is still to be determined. WSJ's Don Clark reports on Digits.
The design trend, expected to be the focus of announcements by Intel Corp. and Advanced Micro Devices Inc. at the Consumer Electronics Show early next month, is based on bringing together two long-separate classes of products: microprocessors, the calculating engines that run most PC software; and graphics processing units, which render images in videogames and other programs.
Putting the two technologies on one piece of silicon reduces the distance electrical signals must travel and speeds up some computing chores. It also lowers the number of components computer makers need to buy, cutting production costs and helping to shrink the size of computers. Such integrated chips are expected to allow low-priced systems to carry out tasks that currently add hundreds of dollars to the price of a personal computer, such as the ability to play high-definition movies and videogames and to convert video and audio files to different formats quickly.
The approach "is going to change the way people build PCs and buy PCs," Paul Otellini, Intel's chief executive, predicted at an investor conference early this month.
But the benefits won't be measurable until after the CES show, when computer makers are expected to disclose their plans for using the technology. And some industry executives insist that many PC users will continue to seek even better performance by picking systems with separate graphics-processing-unit chips.
Intel, which supplies roughly four-fifths of the microprocessors used in PCs, is using the event to introduce a broad overhaul of its flagship Core product line using a design that is code-named Sandy Bridge. The products add GPU circuitry that Intel has offered in companion chipsets, as well as video-processing features and other undisclosed features aimed at improving the visual experience of using PCs—technologies Intel plans to market as part of a campaign called Visibly Smart.
Mr. Otellini said demand is "very, very strong" for the chips, which are expected to be used in hundreds of new designs for laptop and desktop PCs at various price points. Intel also is expected to offer a new version of a technology known as Wi-Di, which allows laptop users to wirelessly display images on high-definition TV sets.
The trend is at least as important for AMD, perennial underdog to Intel in the microprocessor market. AMD spent $5.4 billion in 2006 to buy ATI Technologies, one of two big makers of GPUs, and vowed then to combine that technology with its microprocessors by early 2009 in an initiative it calls Fusion.
That effort took longer than the company anticipated. AMD is using the CES trade show to introduce microprocessors with GPU circuitry that are targeted at laptops in the $200 to $500 range. But it doesn't expect to offer high-end Fusion chips that could directly compete with Intel's overhauled Core line until the middle of next year.
AMD expects the chips being introduced at the CES show to add much better capabilities for playing games and high-definition videos to a low-end portable category known as netbooks, a market Intel has dominated. "We are bringing just this incredible amount of visual and computing power to segments where it hasn't been seen before," said Rick Bergman, an AMD senior vice president who is general manager of its products group.
The third player affected by the trend is Nvidia Corp. The Silicon Valley company competes fiercely with AMD in sales of GPUs, but agrees with its rival on one point: The graphics circuitry added in Sandy Bridge—though an improvement over Intel's past efforts—still isn't adequate for many applications.
Both companies cite that the new Intel chips don't support a Microsoft Corp. programming technology called DirectX 11, needed for some popular videogames, while their products do. An Intel spokesman responded, saying that many widely used games will work fine using Sandy Bridge, which the company predicts will make GPUs unnecessary in low-end PCs.
Nvidia says many PC makers don't seem to agree with Intel's assertion, with more than 200 forthcoming models based on Sandy Bridge also including its GPUs.
"We have more design wins in Sandy Bridge than any other platform," said Nvidia CEO Jen-Hsun Huang.
Mr. Huang says the new Intel chips with built-in graphics, instead of hurting Nvidia, will help the company by driving demand for PCs—largely because of other technology improvements. "I think this is the best microprocessor that's been built for quite a long time," he said.
Intel hasn't disclosed performance estimates for the new chips, which are expected to start with high-end models that have the equivalent of four calculating engines.
One person who has tested the technology is Kelt Reeves, president of the gaming-PC maker Falcon Northwest. While the graphics performance won't satisfy gamers, in Mr. Reeves's opinion, the four processors on Sandy Bridge chips top the performance of six processors on existing Intel products. The chips are "ridiculously good," he said.
By LORETTA CHAO
BEIJING—Lenovo Group Ltd. is notching gains in emerging markets, picking up market share in such places as Russia and India, where the Chinese company can use experience gained at home to woo lower-income customers.
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Lenovo Group is notching gains in emerging markets.
The world's fourth-largest personal-computer company by volume is tailoring its approach in emerging markets to first-time buyers, who account for a larger chunk of sales in such areas than they do in more-developed markets, Chen Shaopeng, senior vice president of Lenovo's emerging-markets business, said in an interview.
To attract such buyers, Lenovo has employed tactics that have made it China's PC market leader: offering colorful models and products that can cost less than $300, as well as using retail franchisees who have insight on their individual markets. Lenovo also has increased advertising, using one of the world's biggest billboards, a 1,300-foot-long spot near the Kremlin.
Lenovo increased its share of Russia's market to 8.3% of PCs shipped in the third quarter from just 1.4% in the same period in 2008, according to research firm IDC. Lenovo is now the fifth-biggest PC vendor in Russia, up from No. 14.
In India, where the company aims to add 1,000 franchised retail stores to the 350 it has already, Lenovo has grown to 9% of the market from less than 7% at the end of 2008. The company ranks fourth in India, after Dell Inc., Hewlett-Packard Co., and Acer Inc. by volume.
Lenovo has been trying to steer away from relying on advanced markets like the U.S. to fuel overseas growth. The company struggled with weak consumer sales and declining market share after its purchase of International Business Machines Corp.'s PC business in 2005.
Co-founder Liu Chuanzhi returned as chairman, and then-Chairman Yang Yuanqing was named chief executive. The new leadership vowed a renewed focus on China and other developing markets.
Russia and India are only the eighth- and ninth-biggest PC markets in the world, respectively, with the U.S. and China the two biggest. And emerging markets outside China accounted for only 18% of Lenovo's revenue in the quarter through September, with 36% coming from mature markets and 46%, from China.
But Mr. Chen said emerging markets are Lenovo's fastest-growing regions, and helped Lenovo achieve a company-high global market share of 10.3% in the quarter, according to IDC. "In the long term, we expect the percentage mix [of revenue] contributed by emerging markets outside of China to increase as these markets grow," Mr. Chen said.
David Wolf, chief executive of Wolf Group Asia, a Beijing-based marketing strategy firm, said that while Lenovo's international push is yielding progress, the company still has to show it has a solid long-term strategy.
"After many years of having the hell kicked out of them, it's nice to have some positive results," he said. "But it's still very early days. Whether they can scale on whatever modest results they've been getting is a significant question."
Lenovo is struggling to show that it can branch into innovative new product segments that are increasingly important for PC companies. Lenovo introduced its LePhone smartphone this year based on Google Inc.'s Android operating system, but so far the phone is for sale only in China.
The company created a separate videogame-console company but hasn't released a product yet. Lenovo also has been working on a tablet PC, the LePad, but the status of that effort isn't clear. The company also delayed the release of the IdeaPad U1, a hybrid laptop with a screen that can be detached and used as a tablet, which created buzz when Lenovo unveiled a prototype at the January Consumer Electronics Show in Las Vegas.
Lenovo's "strategic vision and execution in new-product development remain weak," said Charles Guo, a J.P. Morgan analyst in Hong Kong. He said the company needs to be more aggressive to capture an opportunity left by management troubles at H-P, whose CEO was ousted in August.
Mr. Chen said concepts like the IdeaPad U1 establish that Lenovo is "a leader in innovation." The company declined to say when the product might be released, however.
After taking the reins of Lenovo's emerging-markets business last year, Mr. Chen said he traveled to such places as Russia and India, where IBM's ThinkPads were well known but Lenovo's brand wasn't, and saw similarities with China.
Lenovo's strategy in emerging markets is what it calls "best fit" computers rather than "best" computers. Much of that has to do with price. Mr. Chen said the company modified a desktop model for India to lower costs, though he declined to elaborate. The machine sells for about $280, including taxes.
The strategy also means knowing which basic features are most attractive to new buyers. Lenovo's Z-series laptops, which come in a variety of colors, are popular in India because "a lot of young users, even at the entry level, want something stylish," Mr. Chen said. In Russia, Lenovo became one of the first PC vendors to offer a laptop with built-in WiMax wireless capability.
Lenovo's rollout in India of franchised stores carrying its products exclusively is similar to its practice at the company's network of 20,000 stores in China. The locations are outfitted by Lenovo but owned and operated by local business owners who can tailor their services and offerings to local buyers.
Vipul Jain, director at Unique Infoways Ltd., which owns three Lenovo stores in New Delhi, said his company invested $40,000 to open its first such outlet in Nehru Place, a hub consisting of hundreds of electronics shops. Lenovo provided training for the store's staff and pays a commission to Unique Infoways, which expects to open another ten stores with Lenovo around the nation over the next year.
While PC users in mature markets feel comfortable buying computers online, first-time buyers in emerging markets want to see and touch the machines, Mr. Chen said, "so our strategy was is to build the retail coverage."
For the first time since the start of the crisis, mergers-and-acquisitions bankers can look forward to the New Year with a degree of optimism.
Again, 2010 was a modest year for deal making, with global announced volumes up 18% to $2.76 trillion, according to data provider Dealogic. That is well below 2007's $4.6 trillion peak, but a flurry of bids since the summer suggests corporate chiefs are rediscovering their animal spirits.
True, the M&A recovery in 2010 promised more than it actually has delivered. Some of the biggest bids, such asBHP Billiton's $40 billion hostile bid for Canada's Potash Corp. of Saskatchewan, were abandoned. Others, including Sanofi-Aventis's long-running pursuit of U.S. biotech company Genzyme, still are talking, while some, like Vimpel Communications' $21 billion bid for Italy's Weather Investments, have yet to close. One feature of 2010 deal making was the increased regulatory and political risks facing cross-border transactions.
But the conditions for an M&A recovery are in place. Almost one-third of the European market trades below 1.1 times replacement value, according to Credit Suisse estimates, implying it is as cheap for companies to buy companies as to build their own new capacity. And corporate cash piles, which earn virtually nothing in the bank, are rising. Almost 30% of U.S. companies have net cash. What's more, U.S. corporate free-cash-flow yields are more or less in line with investment-grade corporate-bond yields compared with a 20-year average of 5.5% below, according to Credit Suisse. That suggests deals will just about fund themselves.
Buyers also are returning. Private-equity firms announced $184 billion in buyouts this year, up 74% from 2009's lows, notes Dealogic. Buyout firms have roughly $450 billion in uncommitted funds. The bond market also is supportive: High-yield bonds now yield just six percentage points over government debt compared with 20 percentage points at the height of the crisis. Emerging-market bidders also are active. Emerging-market M&A surpassed Europe for the first time in 2010, and is likely to do so again in 2011.
The snag is confidence. Sure, signs are encouraging. Unsolicited bids accounted for 8% of global M&A this year, a 10-year high, notes Ernst & Young. Price discovery also is improving, as evidenced by $275 billion raised in initial public offerings globally this year, the second highest on record after 2007. But investors still are skittish, nervous about the state of the global economy, particularly given the euro-zone sovereign-debt crisis. That points to more midmarket acquisitions than a rash of big strategic deals.
After the last three years, most bankers would happily settle for that.
TOKYO—Looking to become the world's leading clothing retailer, Japan's Fast Retailing Co. plans to introduce its Uniqlo stores in the fast-growing Indian and Brazilian markets and to vastly expand its presence in China, where the number of stores are intended to leapfrog those in Japan by 2020.
So-called fast-fashion retailers such as Spain's Inditex SA, which is the world's largest clothing retailer and operates the Zara chain, and Sweden's Hennes & Mauritz AB are quickly expanding their respective empires around the globe as consumers move away from higher-priced clothing in favor of less-expensive options. Fast Retailing, Asia's leading clothing retailer by sales, said it aims to move ahead of Zara and H&M within a decade, as it ramps up store openings—particularly in Asia.
Fast Retailing's fashion focus, however, is different from its competitors: It sells casual, affordable basics, such as fleece jackets, jeans and its Heat Tech line of thermal underwear. "We don't make clothes that you throw away after one season," said Naoki Otoma, Fast Retailing's chief operating officer.
In its home market, where Fast Retailing derives the bulk of its revenue, the company has caused a buzz by breaking with many of the conventions of Japanese businesses. Fast has said English must be spoken at all business meetings where foreigners are present, that all email correspondence must be written in English by 2012 and that the number of its foreign employees will overtake Japanese workers by 2015.
The retailer is quickly becoming a template for the rest of corporate Japan, faced with the twin obstacles of shrinking domestic demand and a dearth of Japanese leaders with the know-how and language skills needed to lead a push into global markets.
"Our advantage is that we are a Japanese brand, which is known for good quality and design, and we are closer in proximity to the Asian countries," Mr. Otoma said in an interview. "In China, we will grow organically without alliances or collaborations. There are no Chinese companies that can do a better job there than us.…We won't be striving to increase our store count in Japan by that much going forward."
Uniqlo is forecast to have 844 stores in Japan and 76 in China by the end of August. By 2020, Uniqlo aims to have 1,000 stores in China through organic growth alone. Zara had 60 stores in China as of Oct. 31.
Mr. Otoma, 50 years old, said Uniqlo also aims to crack the Indian and Brazilian markets within five years. Although a foreign retailer currently can enter India only as a minority stakeholder with a local partner, this restriction is likely to change soon. "Based on our research, these regulations will likely be dissolved within one year," Mr. Otoma said.
In the crucial U.S. market, Uniqlo is rebuilding its brand following some earlier missteps. It has retreated from suburban shopping malls and now has only one store, in Manhattan's SoHo neighborhood. The company aims to open an online shopping site soon to reach more American consumers and plans to open a flagship store on New York's Fifth Avenue next year.
The company has made no secret of the fact that it is scouring the market for acquisitions in the U.S., following a botched bid for Barneys New York in 2007.
"We have received many proposals," Mr. Otoma said. "There are not that many good options in the market right now. And for the companies that are doing well, the amount of money required to acquire them is tremendous. We have to advance with e-commerce quickly. Our priority has been branding and raising our brand awareness in the U.S."
Although Fast has been vocal about its plans for global domination, the past year has been choppy after a period of buoyant profitability.
November same-store sales in Japan tumbled 15% from a year earlier, marking the fourth consecutive month of decline. The number of customers fell 7% and sales per customer dropped 8.1%.
Fast in October forecast that full-year net profit for the year through August would fall for the first time in four years, by 17% to 51 billion yen ($608.1 million). The company projected that net sales will rise by 5% to 856 billion yen, however. The company's stock is off 27% so far this year.
Tadashi Yanai, Fast Retailing's founder and chief executive, has blamed the poor performance on shortages in basic core items, poor marketing of the spring and summer lines and oversights in product and production planning.
"I think that our strong performance in the first half of the year led us to be careless in the second half," he said in a presentation earlier this year.
Analysts said that with more than 800 stores in Japan, the market is saturated and consumers are reining in their spending. "Overall purchase sizes [in Japan] have been going down, but Japanese consumers have been increasing the frequency of their visits to stores in some categories. People want to spend less on each visit," said Brian Salsberg, head of McKinsey & Co.'s retail-and-consumer group in Japan.
Mr. Otoma said the company still has a lot to learn, particularly from its foreign rivals. "We can learn from H&M and Zara by looking at the speed with which they launch new stores. They are very courageous to open new stores, whether they succeed or not. We, in contrast, are very cautious with what we do," he said.
When asked whether he has ambitions to lead Fast Retailing one day—a subject of speculation, as Mr. Yanai is 61 and has no obvious successors—Mr. Otoma laughed and shook his head. "I don't want to be the CEO. I want to have a good, balanced life."
Write to Mariko Sanchanta at email@example.com
Corrections & Amplifications
Fast Retailing's same-store sales in Japan were down 15% in November. In earlier versions of this article, it was incorrectly reported that the company's same-store sales were down 155% in November.
BEIJING—McDonald's Corp. is planning its biggest expansion in China as the chain faces mounting challenges from competitors and higher food costs.
The fast-food giant said it plans to raise its capital spending in China by 40% next year from this year's level. It will build as many as 200 new stores across the country next year, more than in any previous year, and swap out the old red and yellow decor for a more relaxed, European-style bistro design.
McDonald's declined to say the value of its investment. It also plans by 2013 to remodel 80% of its existing outlets.
"We're committed to China, changing the face of the brand to become a place where young consumers want to come and stay," Kenneth Chan, McDonald's chief executive of China, said at a news conference Wednesday. The golden arches won't disappear, but their treatment will be made more subtle. The designs in China will mimic those under way in the U.S.
The company, which has been in China for 20 years, is throwing greater weight into the country as competition in the fast-food arena is becoming increasingly fierce. KFC, owned by Yum! Brands Inc., leads all restaurant chains in China, with about 3,200 locations. McDonald's has around 1,100.
Taiwan's Ting Hsin Group, operates more than 1,000 Dicos fried-chicken restaurants. Other companies, including California Pizza Kitchen Inc. and German upscale seafood chain Nordsee GmbH, plan to expand or enter the market. Starbucks Corp. recently announced it plans to better than triple the number of stores it has in China in the next five years to more than 1,500.
By introducing updated designs for the new and existing stores, the Oak Brook, Ill., company also hopes to gain more leverage to introduce premium products and raise prices. China's inflation, which reached 5.1% last month, is increasing costs for McDonald's.
McDonald's a month ago raised the prices of nine items, including chicken McNuggets, pies and ice cream, by 0.5 yuan to one yuan (one yuan is 15 cents) to counter China's soaring food prices. The company also increased prices in July and said it doesn't anticipate additional increases this year.
The company next year plans to introduce menu items in China targeted toward health-conscious consumers.
In Europe, the U.S. and elsewhere, the remodeling efforts have helped boost sales in renovated stores by 7% above those of nonrenovated stores, McDonald's said. The makeover is part of a 2010 global capital-projects investment of $1 billion.
New restaurants, half of which will be drive-through outlets, are planned primarily for China's biggest cities, such as Shanghai and Beijing, but will also be built in less-developed cities. Mr. Chan said the company aims to expand service in cities where it already operates, before moving deeper into China's smaller cities. McDonald's will increase delivery services to 550 locations from 400, and accelerate the opening of McCafés and 24-hour restaurants.
According to analysts, KFC is benefiting from its locations in China's lesser-developed cities, where rent is lower than big cities and there is less competition. McDonald's, which operates in 150 cities in China, currently lacks distribution networks that would allow the company to expand, said Keith Siegner, a restaurant analyst for Credit Suisse. "There's a tremendous opportunity for McDonald's if they broaden out," he said, adding that the company has sufficient capital to invest.
Mr. Chan said the chain is exploring new franchise models that would give the company the ability to license restaurants within entire provinces in China, rather than city-by-city.
"It took us 19 years to get to 1,000 stores," Mr. Chan said. "Now it's time to pick up the pace."
For a winning investment strategy, this year it has paid to bet against the smartest guys in the room.
Had an investor bought the 50 most popularly shorted stocks at the beginning of the year and held them through Friday, he would have earned an average return of 22%, including dividends, according to FactSet. That is nearly double the S&P 500's 12% total return.
One reason: Since so many hedge funds are scouting for stocks to sell short, good ideas are hard to come by.
Recall that to sell a stock short, an investor sells shares borrowed from another investor. The hope is to buy them back, for return to the original owner, after the price falls. But popular picks are often piled into, creating pent-up buying pressure that can cause otherwise bad stocks to appreciate rapidly.
After all, a troubled business and high valuation aren't the only considerations when betting against a stock. Another key is liquidity. If the number of shares borrowed by short sellers is significantly higher than average daily trading volume, it could take multiple days for them to buy back shares to cover bets. Indeed, for the top 50 mentioned above, shorts would have had to buy all shares traded over an average 38-day period to close their positions.
Lately a smart trade has been to buy popularly shorted technology stocks, including data-center companies Rackspace Hosting and Savvis, website OpenTable and prepaid-debit-card companyGreen Dot. Year-to-date, they are up 100% on average.
Solid fundamental analysis is paramount when betting against any company. At the same time, hedge funds must beware crowded trades, lest they get caught in the exit.
In Hong Kong, one of the world's hottest property markets, there are two kinds of companies: those on the right side of government policy, and those on the wrong side.
The city is clamping down on speculation. Transaction volumes have dried up in the two weeks since duties were added to properties resold within two years. Analysts expect more to come and forecast that residential sales volume could fall by as much as 30% in 2011. Meanwhile, margins will be squeezed by high—and rising— land costs.
Naturally, property developers' shares are faring poorly. Among the worst performers is Kerry Properties, which has dropped 9% in 10 days. Shares of real-estate agent Midland Holdings, meanwhile, have plunged 30%.
The outlook for commercial landlords, meanwhile, couldn't be any better. With companies staffing up, the vacancy rate for prime office space across Hong Kong is below 4%, says Colliers International. That compares with a historical average of 8%. Commercial property supply won't come online fast enough to meet demand, so Goldman Sachs is forecasting office rent increases next year of between 20% and 30%.
Stock investors have caught on as well. Because they generate lower returns on equity, landlords have historically traded at a 15% discount to developers, relative to net asset value, Citi Investment Research says. That gap has narrowed to near parity as landlords have rallied this year. For example, Hongkong Land, which is heavily exposed to prime office space in the Central district, is up nearly 37% so far this year.
Still, upward revisions of the company's assets mean that despite that run-up, Hongkong Land shares remain at a 34% discount to Citi's forecast for net asset value. That should narrow as investors grow more bullish about the company's ability to generate profits from its assets. Since 1989, the stock has traded at an average discount of 28%.
Another opportunity lies with landlords with property outside the Central district, who will benefit as investment banks and large corporations break up their operations to move support staff outside of costlier neighborhoods. Shares of Wharf (Holdings), a big landlord on the Kowloon side of Victoria Harbour, and Swire Pacific, which has a concentrated portfolio in the eastern end of Hong Kong, haven't run up as much as Central-focused landlords.
Now is a good time to own the owners.