Facebook ($FB) Increasingly Looking Like A Strong Ecosystem Play

avatar By: IS
Date posted: 09.08.2014 (3:00 am) | Write a Comment

$FBAs I’ve stated several times over the past few years, I’m a big believer in the ecosystem play when it comes to technology stocks. I won’t get too much into why but you can certainly look at these posts for a better idea:

-Ecosystems rule the world
-Have you put your chips on the web ecosystems yet?

Most of us would all agree that Google (GOOG), Apple (AAPL) and Microsoft (MSFT) all qualify as ecosystems. They are at the center of mobile and desktop worlds thanks to their control through the operating systems (Windows, iOS, Android) that has extended over time. I’ve also personally had Amazon (AMZN) and Facebook (FB) into that group which I know many of you disagree with. These companies are increasingly competing in all kinds of different ways but I think it’s safe to say that Facebook is headed in the right direction as I tweeted a few days ago:

In this post, I won’t discuss the valuation or revenue expectations simply because I’ve done so in the recent past and I’m also more focused on explaining why I think Facebook is an ecosystem play.

The Current Environment

In an increasingly mobile world, it’s all about dominating the app landscape. You’d rightfully assume that players which have their own O/S have an easier path to promoting their own apps and that’s certainly true but Facebook has been able to achieve incredible numbers.

-The Core Facebook app remains the most used app by a significant portion of users. It is the only non-Google app to reach 1 billion installs on the Google Play app store.
-Facebook messenger is currently the most downloaded app on Android and iOS
-WhatsApp has confirmed it now has over 600 million users, with Zuckerberg saying it could end up reaching several billion users
-For all of the talk of “youngsters moving away from Facebook”, they have been moving towards a few apps, Instagram, owned by Facebook is arguably the top one.
-It continues to innovate with new apps such as Hyperlapse and Paper.

Yes, Facebook lacks an operating system and did try its own version with Facebook home but that was a failure. I do personally love to see Facebook being so aggressive and while they have and will continue to fail, overall the growth has been nothing short of spectacular, both in terms of users and revenues:

dau

revs

credits: Facebook IR

 The Coming Years

If the “desktop era” was the first big step in the “Social Web”, then I think it’s fair to say that mobile is the current era. In most of the world, that has translated into big companies such as Google, Apple, Microsoft and others unbundling their core apps into different “single purpose” ones. I’m not sure if that model will remain so or if the “China model” where a few apps make it possible to do just about anything dominate. If that ends up happening, I think Facebook has a great position through its core app, but also its messenger plays.  It is very plausible that in the next “web”, search will no longer be at the “center” but it could be other core functions such as maps or messaging.

If we’re taking an even longer term view, the recent purchase of Oculus Rift by Facebook certainly gives it a leg up in trying to compete with Google in terms of artificial intelligence.

What Are Your Thoughts On Facebook As A Dominant “Ecosystem”?

Disclosure: Long Facebook (FB)

Top 100 Dividend Stocks – September 2014 Edition – WIN Remains On Top

avatar By: IS
Date posted: 09.03.2014 (3:41 am) | Write a Comment

maldivesIt’s that time of the month again. Things are always slower in the summer in terms of news, dividend increases, etc. There are still some great opportunities out there and I’m always on the lookout for ways to improve my Ultimate Sustainable Dividend portfolio. Why? Because it’s a key part of increasing my monthly passive income (see last update here). There is no “perfect” stock of course. The market is fairly efficient so it’s all about finding high quality stocks that are a good match for my portfolio and provide a good potential/downside risk ratio. Obviously, yield is just one criteria but it’s an important one and for that reason, looking at the top large cap stocks in terms of dividend payout is a great way for me to get started.

WIN Takes A (small) Step Back

WIN continues to look very solid although it did take a slight step back in the past few weeks. Take a look at this chart:

WIN Chart

WIN data by YCharts

Here is the list!

Ticker
Name
Price
Dividend Yield
Payout Ratio
Ex-DVD
WINWindstream Holdings Inc11.059.05250.779/26/2014
DODiamond Offshore Drilling Inc42.968.1588.6910/30/2014
RIGTransocean Ltd37.987.963.7911/12/2014
ESVEnsco PLC48.936.1336.99/4/2014
FTRFrontier Communications Corp6.795.89362.429/10/2014
NENoble Corp plc27.475.4625.211/6/2014
CTLCenturyLink Inc40.865.29#VALUE!12/4/2014
TAT&T Inc34.845.2853.1310/8/2014
HCPHCP Inc43.095.06106.9211/6/2014
TETECO Energy Inc17.844.9396.6611/10/2014
MOAltria Group Inc43.194.8281.439/11/2014
SOSouthern Co/The43.84.79107.3611/6/2014
HCNHealth Care REIT Inc67.264.733110.7711/6/2014
DRIDarden Restaurants Inc47.754.61157.3710/10/2014
RAIReynolds American Inc59.084.5479.19/8/2014
VTRVentas Inc65.414.43164.069/10/2014
EDConsolidated Edison Inc57.164.4167.8911/10/2014
PMPhilip Morris International Inc85.494.468.079/23/2014
MATMattel Inc34.584.455.211/24/2014
PBCTPeople's United Financial Inc15.044.3987.6710/29/2014
ETREntergy Corp76.384.3583.1111/10/2014
PPLPPL Corp34.274.3579.799/8/2014
PCLPlum Creek Timber Co Inc40.584.34135.5111/12/2014
DUKDuke Energy Corp73.454.3382.3811/12/2014
KMIKinder Morgan Inc/DE39.864.31138.4810/31/2014
FEFirstEnergy Corp33.694.27245.2311/7/2014
VZVerizon Communications Inc49.774.2651.7310/8/2014
LOLorillard Inc59.524.1369.9211/26/2014
SCGSCANA Corp51.324.0960.39/8/2014
AEEAmeren Corp39.344.0775.819/8/2014
TEGIntegrys Energy Group Inc66.974.0661.8811/28/2014
PEGPublic Service Enterprise Group Inc36.584.0558.579/3/2014
PNWPinnacle West Capital Corp56.154.0460.3110/30/2014
POMPepco Holdings Inc27.533.92245.459/8/2014
PCGPG&E Corp47.293.85100.6110/3/2014
CNPCenterPoint Energy Inc24.743.84114.1511/14/2014
KIMKimco Realty Corp23.533.82174.4810/1/2014
SPLSStaples Inc12.633.844.269/24/2014
MACMacerich Co/The65.523.79252.3511/12/2014
XELXcel Energy Inc31.693.7958.439/16/2014
AEPAmerican Electric Power Co Inc52.883.7864.4611/10/2014
EXCExelon Corp32.833.7873.5511/17/2014
WMBWilliams Cos Inc/The59.293.78222.629/10/2014
GASAGL Resources Inc53.13.6970.9311/19/2014
COHCoach Inc36.753.6747.889/5/2014
CINFCincinnati Financial Corp48.283.6552.229/15/2014
COPConocoPhillips80.223.6441.6610/16/2014
PAYXPaychex Inc41.93.6381.3710/31/2014
KRFTKraft Foods Group Inc58.553.5945.059/26/2014
CMSCMS Energy Corp30.243.5759.6911/5/2014
DTEDTE Energy Co77.423.5668.539/11/2014
GRMNGarmin Ltd53.923.5657.449/11/2014
PFEPfizer Inc29.263.5557.6811/5/2014
FCXFreeport-McMoRan Inc35.493.5284.8210/16/2014
LEGLeggett & Platt Inc35.393.5187.719/11/2014
HSTHost Hotels & Resorts Inc22.833.5169.529/26/2014
WECWisconsin Energy Corp44.73.4956.9611/12/2014
CACA Inc28.653.4950.3911/18/2014
MCDMcDonald's Corp92.83.4955.7611/28/2014
TGTTarget Corp60.193.4653.3211/14/2014
NUNortheast Utilities45.443.4659.459/11/2014
DDominion Resources Inc/VA69.473.4572.8812/3/2014
GMGeneral Motors Co34.83.4509/8/2014
WYWeyerhaeuser Co33.993.4184.9511/5/2014
GEGeneral Electric Co25.853.453.119/18/2014
CVXChevron Corp127.543.3634.8911/19/2014
CLXClorox Co/The88.663.3466.1610/20/2014
NAVINavient Corp17.983.34#VALUE!9/10/2014
OKEONEOK Inc70.233.28117.511/5/2014
HASHasbro Inc52.6653.2772.8810/30/2014
CVCCablevision Systems Corp18.523.24122.8611/13/2014
PLDPrologis Inc40.913.23288.829/11/2014
SESpectra Energy Corp41.723.2180.5611/12/2014
PSAPublic Storage175.33.19105.029/11/2014
WMWaste Management Inc47.263.17696.949/3/2014
CAGConAgra Foods Inc32.113.11140.910/29/2014
KMBKimberly-Clark Corp1083.1158.089/3/2014
PGProcter & Gamble Co/The82.983.16110/15/2014
LLYEli Lilly & Co63.683.0844.8911/14/2014
GISGeneral Mills Inc53.363.0753.4110/10/2014
SPGSimon Property Group Inc170.123.06111.9611/10/2014
LMTLockheed Martin Corp173.83.065211/27/2014
ABBVAbbVie Inc55.073.0576.9910/15/2014
CSCOCisco Systems Inc24.883.0547.999/30/2014
SYYSysco Corp38.23.0472.3110/1/2014
KKellogg Co64.793.0336.1611/28/2014
EQREquity Residential66.33.02#VALUE!9/18/2014
GMEGameStop Corp43.753.0237.2111/28/2014
AVBAvalonBay Communities Inc154.153.01932.949/30/2014
AIVApartment Investment & Management Co34.523.0131414.2711/12/2014
IRMIron Mountain Inc36.092.99213.919/24/2014
NEENextEra Energy Inc97.232.9865.1111/26/2014
MRKMerck & Co Inc59.792.94116.539/11/2014
KOCoca-Cola Co/The41.642.9357.859/11/2014
MCHPMicrochip Technology Inc48.7752.9271.1411/18/2014
ADIAnalog Devices Inc50.622.9260.329/3/2014
AVYAvery Dennison Corp48.152.9145.8512/1/2014
IPInternational Paper Co48.462.8941.0511/14/2014
DEDeere & Co83.772.8721.139/26/2014
DDEI du Pont de Nemours & Co65.832.8658.8211/14/2014

It’s Not All About Yield

Of course, as I always mention, dividend yield is one criteria but there’s a lot more involved here and finding a stock with strong overall fundamentals is key. I generally try to get stocks that respect the 7-7-7 rule. That is 7% of 5 year growth in dividends, earnings and sales.  If I remove those with a payout ratio over 80% and a dividend yield over 3%, I get very few results but these are clearly high potential stocks:

Ticker
Name
Price
Dividend Yield
Payout Ratio
Ex-DVD
EPS 5Y Growth
DVD 5Y Growth
Sales 5Y Growth
NENoble Corp plc27.475.4625.211/6/201424.6345.059.14
NUNortheast Utilities45.443.4659.459/11/201432.5410.448.7
CVXChevron Corp127.543.3634.8911/19/201446.259.59.6

I will be writing more about these names soon in our free mailing list, join now if you have not done so yet:

Closing 1 Trade (TWTR, DMD)

avatar By: IS
Date posted: 09.03.2014 (3:00 am) | Write a Comment

Ahhh… on the one hand, this certainly feels like great news but I do feel like this stock is running away. Too late to get in? Time will tell. Back to today, I will be closing the August 11th trade: Long Twitter (TWTR) vs Short Demand Media (DMD) which is up about 37%!!

The overall return of the portfolio remains around +30% although I do have 3 losing trades that are alive and will hopefully stage a comeback:)

TWTR Chart

TWTR data by YCharts

Small Break:)

avatar By: IS
Date posted: 08.22.2014 (4:00 am) | Write a Comment

Summer Picnic Wide Desktop BackgroundGood morning, I just wanted to send out a quick message to say that even though no new blog posts appeared this week (or will in the coming week), everything is going well, great in fact:) I’m just getting a bit of rest before the end of summer, and did not have any new long & short trades to open anyway (all 7 trades are within my open/close limits).  Hopefully we get more trading volatility this fall (especially if Europe continues to struggle), which should create more trading opportunities.

I hope you’re all doing well, some fascinating stuff is going on and I can’t wait to get back to writing about it:)

All the best!!

New Trade: Long Twitter ($TWTR) & Short Demand Media ($DMD)

avatar By: IS
Date posted: 08.11.2014 (3:00 am) | Write a Comment

Ahhh, today I decided to finally go ahead after hesitating. I’ve been talking about my temptation to trade Twitter and after being a doubter following its IPO, I did finally declare that I was looking for an entry point. Unfortunately, I did not move quickly enough as Twitter announced very solid earnings which caused its stock to jump in a big way. I’m unsure of how I’ll trade it as a longer term speculative pick but for now I’m ready to trade it as a long & short trade. This morning, as you might have seen, I closed out a successful trade on Facebook and Adobe so today’s trade will set me back to 7 live trades, which is currently my maximum. things continue to go well and the portfolio’s return remains above +30% so far this year.

You can also see my long & short trades here:

http://www.intelligentspeculator.net/livetrades

Today,  I’m trading 2 of the higher priced (in terms of P/E ratios) stocks in my portfolio. I feel like one has much more upside than the other so while there is risk involved trading these 2, I do feel like the risk vs. reward ratio is very good. Let’s start off by looking at the numbers:

Ticker
Name
Price
PE Ratio
PE Next Year
Return YTD
Sales Growth
Analyst rating
Book Value
Beta
Revenue/Share
TWTRTwitter Inc42.8195N/A119.11-32.44109.793.545.14N/A3.51
DMDDemand Media Inc10.27N/A149.58-9.693.683.1126.880.7422.29

TWTR Revenue (Quarterly YoY Growth) Chart

TWTR Revenue (Quarterly YoY Growth) data by YCharts

$TWTRLong Twitter (TWTR)

Twitter is a challenging company to analyze but what’s clear to me is that it has a very unique product that is well suited to this new mobile, ecosystem world and despite attempts by the best of the best (Facebook, Google and others), no one has come close to delivering a comparable product. That does seem to indicate that Twitter is well positioned to thrive in this new ecosystem-driven world. It will hurt Twitter’s attempts to branch out through things like Vine, setting up an ad network, etc but even those attempts make a lot of sense and I think Twitter should continue to push forward. How much can Twitter grow from here? I think there’s little doubt that it can generate a lot more money and its increased focus on monetization has already started to pay off. I’m not 100% convinced that Twitter will ever become a product used by the mainstream in the same way that Facebook is but it certainly has a shot and I do feel like those are a few of the reasons that make it possible to justify its sky-high valuation.

TWTR Chart

TWTR data by YCharts

Next earnings release: November 14th 2014

$DMDShort Demand Media (DMD)

Demand Media is a typical Internet 1.0 internet that has helped the company create solid properties such as eHow.com. Unfortunately, most of those properties are losing ground in a world ran by ecosystems and DMD has not been evolving quickly enough. I do expect the decline at DMD to continue if nothing special happens. Can profits return? In the short term yes but that would most likely be about cutting costs and other shorter term actions like spinning off undervalued divisions. I can’t think of one reason that would justify DMD’s current valuation. One question for you. In a world where most users access the web through mobile, through apps, how many apps of this company do you use and how much time do you spend on them?…

DMD

Next earnings release: November 7th 2014

Disclaimer: No positions on Twitter (TWTR) or Demand Media (DMD)

Closing Trade ($FB, $ADBE)

avatar By: IS
Date posted: 08.11.2014 (2:30 am) | Write a Comment

This morning, I will be closing out a new trade at the open, closing out a successful trade from June 9th, where I went long Facebook (FB) and short Adobe ($ADBE). As regular readers know, I’m very much a believer in Facebook and also hold a longer term position.

FB Chart

FB data by YCharts

Disclosure: Even after closing out this trade, I will remain long Facebook

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