How to Vet Your Investing Ideas

It's easy for an investor to fall for a good story. Strong headlines, new technologies, burgeoning industries -- these can easily lead to great stock ideas. But they can also lead to big losers. So how can an individual investor buy into the good ones and dodge the losers? That's where "due diligence" comes in. Study the company, read SEC filings, learn about management -- it's not rocket science, but it can be daunting and it can take some time.

One common shortcut is to see what the "smart people" are saying. Just be sure that the smart people you look to have your best interests in mind. Talking heads on TV are not working for you. Brokers usually make money on frequent trades, which is not in your interest. Even financial advisors often have the wrong incentives in place, and can easily steer you wrong. If you're trusting someone else to vet your ideas, you want to make sure that they work only for you, and that their compensation is aligned with your success.

If that's the case, it can help to begin by seeing what they have to say. Then it's on you to follow up and make your own decisions.

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Game of Thrones? More Like Game of "Pwned"

Game of Thrones is going to get "pwned."

There, I said it -- and fans of George R.R. Martin's long-winded and epically tardy fantasy series can flame away. The version of GoT envisioned by Time Warner's (NYSE: TWX  ) HBO enjoys undeniable popularity with the sci-fi/fantasy set. Yet the series suffers from one fatal flaw: its creator.

Author Martin published his first volume in the Game of Thrones series some 17 years ago. It took him nine years to complete the next two volumes ... then five more years to complete the fourth (A Feast for Crows) ... and then six more years before the critically panned A Dance With Dragons finally lumbered out of its cave in 2011.

Supposedly, two more volumes are in the works, and Martin plans to wrap up the series with them. But if he maintains his current plodding -- and even decelerating -- pace, it could take another 13 years before the text version of this saga flaps its way to conclusion. Meanwhile, at age 64, Martin is already no spring chicken -- which puts into question whether the series will ever conclude.

This, unfortunately, leaves the fate of HBO's franchise up in the air. Depending on the deal it's worked out with Martin, it has perhaps two -- or, if it's lucky and Martin types quickly -- three years of programming left before the revenue stream dries up. News Corp. (NASDAQ: FOX  ) faces a similar dilemma, and in rather shorter order, as its HarperCollins subsidiary owns the distribution rights to the GoT books in the U.K. and Australia.

Longships on the horizon
Speaking of the U.K., there's an even more imminent threat to the GoT publishing/cable colossus, and it's already visible off the shores of Great Britain.

You see, capitalizing on the swords-and-sorcery success of GoT, the History Channel (owned by Disney (NYSE: DIS  ) /Hearst joint venture A&E) recently launched Vikings, a historical fantasy based on the exploits of certain Danish seafarers who terrorized Europe with their Middle Ages depredations.

Vikings became a huge success for A&E when it began airing in the U.S. in the month preceding GoT's Season 3 premiere on HBO. On Friday, Amazon.com (NASDAQ: AMZN  ) announced a deal in cooperation with MGM (NYSE: MGM  ) Television to bring the series to the U.K. and Germany via Amazon's local streaming subsidiary LOVEFiLM.

Result: Just as GoT begins winding down and going into hiatus next month -- and its fans begin going into withdrawal -- Amazon and MGM will move in to slake their thirst for ice and fire with an all-you-can-eat streamed offering of Vikings. Then, next year, Vikings will sail back in to take yet another ride on GoT's coattails.

Foolish final thought
It's at that point that things get really interesting for Time Warner, for News Corp. -- and for MGM, Disney, and Amazon as well. For the books Martin has written so far, next year's Season 4 will mark the penultimate. With only one more season certain to be produced, and with material written to support it, viewers will begin seeing the writing on the wall for long-in-the-tooth GoT.

At that point, viewers may realize that Vikings, not shackled to a lackadaisical author, and with several hundred years' worth of historical material to draw upon, has much more of a future ahead of it. The profits HBO & Co. have milked from GoT will begin to evaporate, just as the profits from A&E's franchise begin to roll in. (With the tide, of course.)

Then will the cry go forth: The king is dead! Long live the Jarl!

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Michael Kors Had Better Look Out

At the very beginning of this year, Gap (NYSE: GPS  ) decided to drop $130 million to pick up a little chain of stores called Intermix. The brand has only 32 locations in North America and no international footprint. It sits well outside Gap's other brands, offering $2,000 dresses and jeans for hundreds of dollars.

Gap is expecting good things from Intermix, though. The brand has very little online presence and no international offerings. Last week, management highlighted the potential for Intermix, no doubt hoping to capitalize on some of the success that Michael Kors (NYSE: KORS  ) has seen recently.

High-end, high-margin
In its first foray into high fashion, Gap decided to purchase a non-designer. Intermix doesn't make its own clothing; it's a boutique for other designers. That means that Gap was able to get into the business without having to acquire excess production and design capabilities. The boutiques don't carry Kors but do have offerings from designers such as Jimmy Choo and Fendi.

While the product offering is similar to Kors', the operating model is closer to The Buckle's. Buckle also carries other brands -- though there is a Buckle line. The company used that middleman status to run a 27% operating margin last quarter. Gap would love to have that pulling its operating margin up, as last year it managed only 12%.

The competition
Kors isn't going to go quietly along with Gap's growth plan, though. The company has been pushing sales up at a crazy pace over the past nine months. Comparable sales are up 41% across the brand, and total revenue was up 71%. Kors' brand strength has never been higher, and it's quickly becoming the go-to brand for big names.

If Intermix wants to compete, Gap is going to have to scale up quickly and expansively. Thirty-two locations can't compete with Kors' 388 stores. But even if Gap can't beat Kors, it still has a chance to break into a profitable new market. High-end customers have bounced back faster than Middle America from the crisis, and sales at many luxury stores have been strong.

If Intermix can tap into that segment, it should be able to help generate extra cash for Gap and bring that operating margin up slightly. That will give the company more room to run with its secondary brands, such as Athleta.

In the next three years, as Intermix speeds up and Kors slows down, the fight is going to get hotter. Be on the lookout for an Intermix near you soon, and watch Kors' margins to see whether the company has to dip into discounting to fight off the new threat from Gap.

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