The euphoria phase of the bull market that I warned about months ago is now beginning its final parabolic phase. I’m guessing we still have another month to month and a half before this runaway move finally ends. Depending on how far above the 200 day moving average it ends up stretching, I think there’s a pretty good chance we will see the entire intermediate rally wiped out in a matter of days or even hours when this house of cards finally comes tumbling down. 

…….read more HERE

We’ve been following Audience (ADNC) for some time now as a compelling long, but yesterday’s insider buy sends such a strong signal that we felt compelled to post this now.

Yesterday, May 7th, ADNC’s CFO Kevin Palatnik bought 25,000 shares, worth $350,000. This is after a previous 50,000 share purchase on March 7th. In total, he has purchased more than $1 million worth of stock in the last two months. This is eye-opening for a CFO with a $300k salary. In all of our time following the market, we have never before seen an insider make a personal bet of this magnitude.

In light of the earnings disappointment following Mr. Palatnik’s substantial purchase in March, it is unlikely that he has been buying shares on the prospect of ADNC outperforming as a standalone entity. Instead, Mr. Palatnik most likely believes that ADNC will be acquired significantly above today’s prices.

ADNC’s circumstances alone make an acquisition likely in the long term. However, Mr. Palatnik’s continued insider purchases alter the prospect of a sale from a reasonably likely eventual outcome to highly likely in the medium term.

ADNC makes voice processors that are in several top devices, including Samsung’s (SSLNF.PK) S3 and S4 as well as Google’s (GOOG) Nexus 10. A full list of the devices that use ADNC’s technology is available here. ADNC’s voice processors improve sound quality by distinguishing between the speaker’s voice and ambient noise. As the leader in the space, ADNC is in an enviable position. The company’s technology has significantly outperformed comparables from the likes of Apple (AAPL), Qualcomm (QCOM), and others. Without ADNC, there would have been no Siri for the iPhone.

ADNC’s technology could be a compelling strategic play for potential buyers. The companies in this space compete fiercely and voice quality is becoming increasingly crucial to differentiate. Qualcomm’s Fluence product has been losing market share to Audience and the company certainly has the means to make a defensive acquisition. Other high profile potential buyers include Google and Samsung, both of whom already use ADNC’s technology in key products.

The unusually high VC ownership in ADNC is another strong indicator of a likely medium-term acquisition. A large VC ownership stake typically indicates a higher-than-normal probability for a buyout, as VCs are incentivized to cash out to return profits to their LPs. In the case of ADNC, more than 54% of the company is held by VC funds including New Enterprise Associates (21.0%), Paul Allen’s Vulcan Capital (17.6%), and Tallwood (15.7%).

ADNC has strategic importance to enormous tech companies, sizeable cash, a fast growth rate, and VC backing. These circumstances alone would make the company a highly likely buyout target on its own merit. The continued buying of ADNC’s CFO in quantities larger than his annual salary makes this a rare opportunity.

The only question remaining is what a reasonable valuation range for a buyout would be. Companies of this nature are typically bought out for a multiple of sales. Given its high growth profile and strategic importance, a buyout of ADNC would likely be in the 2x-5x sales range (Qualcomm has higher margins but much slower growth and trades around 5x sales). To us, the upper end of this range seems reasonable given Audience’s compelling IP.

What’s clear is that such a buyout would be at a substantial premium to today’s price. Using a conservative 2x sales valuation and consensus 2013 sales forecasts of $180 million, ADNC could be acquired for $360 million + $124 million of cash and marketable securities, or $20.77/share using 23.3 million fully diluted shares.

ADNC is growing quickly and we like the company’s fundamentals. However, in the interest of expediency, we have not discussed them in depth here. If you are interested in this information, feel free to reach out directly or leave a comment.

Kingsley Park Capital is a private investment fund. We employ a long/short equity strategy and are flexible, opportunistic investors. This allows us to take advantage of the best opportunities available in the market at any given time. We are most often involved in small/micro cap and special situations, including binary events. Our fund is currently closed to new investors.

If you are interested in our TrendTRAKR for Canadian Equities (S&P/TSX60) or Australian Equities (S&P/ASX200), please email Eileen at eileen@weldononline.com and we’ll be sure to email them to you, daily, until they are available on our website or your trial period ends.  Our TrendTRAKRs for Metals & Energy Equities, Foreign Exchange and Fixed Income are all ‘soon to be released’.  Let us know if you’d like to be added to our ‘waitlist’ for their release.

“Europe is going to be around,” Warren Buffett explained on CNBC earlier this week.

He’s right. Europe isn’t going anywhere. And it’s cheap…

“Europe’s economic problems present a buying opportunity,” he said. “We’ve been buying some European stocks and companies in the past year.”

Since 1964, Warren Buffett has increased the book value of his holding company, Berkshire Hathaway, by 587,000%. That’s enough to turn a $10,000 investment into nearly $60 million. The guy knows how to make money in the markets.

And right now, he’s looking to make money in European stocks.

You might not be ready to buy Europe. But you can make some real money here… so you need to understand this opportunity.

Over the past year, a certain group of European stocks have outperformed their U.S. counterparts. What’s more… even after that run, they are still a better value than U.S. stocks today.

So based on history, we still have an excellent opportunity to get in this trade.

Let me explain…

Last April, when I updated DailyWealth readers on this opportunity, Europe was a mess. Greece was in the process of yet another bailout. And several European countries were already in recession. In short, there were plenty of reasons to be afraid of Europe. But that is often the best time to buy…

Since then, the group of European blue chips I discussed – the Euro Stoxx 50 Index – actually outperformed the S&P 500. Take a look…

The Euro Stoxx 50 Index is up 26% in just over a year. You won’t read about it in the news, but that beats the 22% return in the S&P 500 over the same period. And importantly, we still have a great opportunity to buy today.

Right now, the Euro Stoxx 50 trades for just 12 times this year’s earnings. That’s 20% cheaper than the S&P 500…

These European blue chips are also cheaper than the U.S. and other major world stock markets based on just about every measure. Take a look…

The easiest way to buy European blue chips is with the SPDR Euro Stoxx 50 Fund (FEZ). Importantly, this fund doesn’t hold fly-by-night companies. It holds the largest multinational blue-chip companies in Europe…

Top holdings include Sanofi, a $146 billion health care giant based in France… Total, a $121 billion oil & gas giant, also based in France… and Siemens, a $93 billion multinational based in Germany.

The companies in this fund will still do business and make money, no matter what. They’re cheap – a much better deal than U.S. stocks. And even with Europe’s troubles, they’ve soared. We have an uptrend here.

So what are you waiting for?

If you don’t own them already, it’s time to join one of the greatest investors in history and buy European stocks.

Good investing,

Brett Eversole

Further Reading: 

In August, Brett urged readers to take advantage of “a possible 55% gain in 19 months with European stocks.” If you took his advice, you’re about halfway there in just eight months.
 
If you still can’t stand the thought of owning European stocks, Dr. David Eifrig shows you another super-safe way to diversify. “For folks worried about diversifying their assets out of U.S. dollars, this is one of the greatest ideas in the world…” Get the details here.

The big news in the popular financial press was the Dow breaking 15,000. But readers here know that the far broader S&P 500 is my preferred gauge of the US market. The 500 hit its fourth consecutive all-time high and the fifth all-time high in six sessions. Yesterday’s 0.52% closing gain, a mere 7 basis points off its intraday high, was a close runner-up to the eurozone, where the EURO STOXX 50 rose 0.67%, but neither came anywhere near the stunning 3.55% gain in the Nikkei 225 after a four-day weekend. Reuters attributes the US gains to optimism over German data (factory orders surprised to the upside). But that seems far too specific. A prolonged bout of global QE euphoria strikes me as a more plausible explanation.

……read more HERE plus 4 more charts