Short update and Nvidia Short Analysis

Hey guys/gals,

It's 13.48, saturday the 4th of Juli 2009 as I'm writing this. Unfortunately it so happened to be that the sun disappeared without warning, meaning I can't lie down in the garden for a while to relax. Instead I'm writing this blog right now, since I'm waiting for someone to come and I don't really have anything else to do. Today I had my final exam for this year for Chinese, which required a lot of hard work the last couple of days. I think I can recognize a couple of hundred characters right now. It's not that hard, Chinese, it just takes time. My score was 92%. I'm proud of myself. Even though there were a few others with a slightly higher score, I had the best written text. So yeah, kudos.

You know, I try to make my blog fun to read for most people out there, so not only the investors or stock market fanatics visit this site. That's why my posts will be often made up of different elements (personal life, stocks, other interests etc.) Now I'm going to the swimming pool in 30 minutes approximately *45 minutes, my minutes last 1.5 times as long as regular minutes*, so I'll try to write about something stock-ish in twenty.

You might wonder by now which companies I own, and why I own the companies. Let's start with one for today: Nvidia.

---people who are not interested in investing, stop reading here--

Why do I like NVidia? First of all, the stock price, when I bought it, it had fallen by roughly 70 percent. I bought the stock at € 8.51. I don't know how much that is in dollars. If you really want to know, count it yourself. I'm from the Netherlands so I count everything in euros.

Nvidia in my opinion is a good company which still has plenty of growth opportunities ahead of it. Nvidia does have a large market share, approximately 60% if I'm not mistaken (might be a bit more, all depends on which date you look at it), but the amount of users which use computers is still growing. The market in India and China and other developing countries is not yet saturated. I reason like this: wealth increases globally, especially in countries like Brazil, China, India, Russia. Those people need computers. Eventually they'll need better and better computers. Better computers need better graphics. Nvidia provides better graphics. Therefore, I think Nvidia will sell it's high-end models mostly in western countries (for now) while it will sell slightly less technical advanced cards in Azia and such. When the wealth in those countries increases, so will the need for better graphic cards, which NVidia will have ready.

Now let's have a look at the balance sheet. Despite the crisis it still looks good.

Nvidia has total Assets of $ 3,350,727,000. Current assets are 2,167,958. The rest is non-current assets.
Now the stockholder's equity is $2,394,652,000. The total liabilities are approximately 950 million. That means that there is twice as much shareholder's equity as there are loans. This company won't go out of business anytime soon. Their balance sheet is healthy, and they have plenty of money to go on for a while.

Now about the earnings per share. In 2009 the company made a small loss of 0.05 per share. The year before they had earnings of 1.31 per share. The year before they had 0.76 per share. I believe that looking at the market as a whole the company can improve the profits. As it stands, with a safe price to earnings ratio of 10, this stock would be worth 13 dollars when NVidia rebounds. Taking a higher p/e ratio (20) it would be worth 26 should they get the same earnings as in 2008. But, believing that they can make more profit than this, and the way NVidia does their business I think they definitely can increase profits. We'll see, but I'll be damned if this stock is worth less than I bought it for.

Next time: AMG, Advanced Metallurgical Group.

Have fun investing, and don't blame me if you screw up ;)

Ciao


PS: Here's a treat - buddha cat meditating, from my own garden.