My investment thesis in a moment, but first let me tell you how Canon came into my purview. I bought three Canon Rebel cameras. Not all at once, but starting with a 35mm SLR more than 15 years ago, moving up to the first Canon Digital EOS Rebel from Sears about 13 years ago, and finally a Rebel T4i about two weeks ago.
I can't say I enthusiastically bought the last T4i. I was excited about the first digital Rebel. Taking pictures without buying film was exciting. Now the situation is quite different. Today we have Google's Android, Apple , BlackBerry , and Microsoft Windows smartphones with double digit megapixels arriving.
Purists will point out that smartphones haven't reached the quality of dedicated cameras because hardware is more crucial than software for image quality. A bigger lens allows more light in, but for the average person, is there a noticeable difference? For me, the answer is shifting closer to no. After my Canon Digital Rebel died (hardware malfunction) I pondered the question and it came down to the ability to use a telephoto lens.
Other than pictures using a telephoto lens, my smartphone is my preferred camera. Today two of my sons wore Greg Jennings jerseys. I took my smartphone out of my pocket and took their picture. A quick push on the screen and it's now on Facebook . In less than two minutes, I went from deciding to take a picture until it was live on Facebook. If I used my digital Rebel, the undetectably better picture would take more than 15 minutes to move from the camera to the computer and uploaded into Facebook. After adding the time wasted reading my friends' postings, adding comments, and clicking "Likes," what could be a quick smartphone process turns into an hour or more gone, never to return. It doesn't matter though; the Canon Camera wasn't a choice.
My Canon T4i died within 10 days after I received it. At first I wasn't worried because I lived in Japan for two years. I know what Japanese customer service is, and if you haven't been to Japan, you have missed out because it's the customer service gold standard.
Sony , Toyota , Honda , and Canon didn't become household names by being average.
However, after calling Canon I quickly had a "We're not in Kansas anymore," moment. The Japanese company I thought I was buying from was Canon USA and the experience was also an ocean apart. Keep in mind that I bought the camera because of the telephoto ability and my only option was sending it to a repair facility. Canon also requires customers to receive repairs fixed with used parts or maybe a used camera as a replacement.
Since I was subject to the possibility of a used camera sent to me as a replacement I asked if I could give a credit card deposit and have one shipped to me right away; avoiding the delay of travel time. I was advised my solution is against company policy and they would not make an exception. Canon did offer to pay for the shipping charges after I called them and the person I talked to was polite, albeit without authority to provide a satisfactory solution.
All companies have defective products and problems; however, it's how a company takes care of problems and their customers that separates the winners and losers. My wife owns a Toyota van and every time she's had an issue she tells me the same thing afterwards, "I will buy another Toyota." I can't say the same about Canon cameras or stock.
Before you come to the conclusion that I don't like the stock because of their service strategy, let me stop you. The smartphone I wrote about earlier that I used to take a picture of twin "Greg Jennings" was on a Samsung Galaxy S3. In fact, I don't own one Apple product, and I love Apple stock. I think Apple is one of the top stocks to own right now.
I think Apple has tremendous opportunities in payment processing and other areas that will keep the company growing long after smartphones become commodity items. You can read my latest article Could Apple Become Your Next Bank? to read how bullish I am. On the other hand, I love Facebook, but consistently warned investors to stay away.
A broken camera brought the company to my attention, but Canon's broken chart and earnings trend places the stock in a shadow. Revenue fell into a hot tub time machine, only instead of the 1980s, Canon stepped back into 2009, into the depths of the financial crises. If Canon is near 52-week lows during QE3 and record S&P 500 highs, what's the scene when the era of cheap easy money is over? I don't think it's favorable.
Don't short Canon because technical analysis suggests a dead cat bounce at this level; however, use share price increases as an opportunity to take money off the table. Use the capital to buy a company that is executing for shareholders like Toyota or Google. Your portfolio will be glad you did.
At the time of publication the author held no positions in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
"...The Canon Factory Service Center repair facility may repair your product or exchange it for a new or refurbished product of the same model, or for a new or refurbished product of an equivalent model to your product, with the same or additional features. Please note that recovered, remanufactured, repaired and/or recycled parts may be used in connection with such repair..."