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Danger Zone: Electronic Arts (EA)

For a while, EA appeared to have cracked the code in the middle part of this decade. By delivering sports franchises like FIFA and games like The Sims, the company saw profits and returns on invested capital (ROIC), which peaked at 93% in 2004, grow to enviable heights. Unfortunately, that strategy has proven unsustainable as ROIC has plummeted.
by David Trainer, Founder & CEO
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Danger Zone: Move, Inc (MOVE)

I don’t see any real upside for MOVE. The company is growing revenue, but extraordinary revenue growth is already baked into its price. Competitors like Zillow are already attracting more traffic, and the threat of entry by a larger company looms over the industry. MOVE is overpriced and falling behind in a competitive industry.
by David Trainer, Founder & CEO
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Danger Zone 9/16/13: E*Trade Babies

Online trading firms aim to exploit the gullibility of many retail investors by encouraging the myth that they can outperform professional money managers armed with vastly greater resources, experience and expertise. The E*Trade babies are the most glaring symbol of this myth. The symbol also reinforces the notion that investing is an easy task that takes no special effort or aptitude to succeed.
by David Trainer, Founder & CEO
New Constructs
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Danger Zone 8/30/13: LinkedIn (LNKD)

LNKD continues our theme of hot stocks that have overshot their fair valuations. So far this year, LNKD is up 110% while the S&P 500 (SPY) is only up 15%. LNKD is a high-momentum stock in a popular sector, so investors are turning a blind eye to its competitive weaknesses and high valuation. Most people are aware that LNKD is expensive compared to its current earnings, but few people seem to aware of its off-balance sheet liabilities and the alarming level of profit growth implied by its stock price.
by David Trainer, Founder & CEO