Weekend Readings

avatar By: IS
Date posted: 04.18.2014 (10:07 am) | Write a Comment

Ahhh it’s about time, but I think winter and cold weather is finally behind us. I can’t tell you how big of a relief that is for me;) In the meantime, here area few interesting readings that you will hopefully enjoy:)

General Readings

-Interview with legendary investor Fred Wilson @ BusinessInsider
-The new venture landscape @ K9Ventures
-Clean coal is the future @ Wired

Dividend & Passive Income Readings

-Top 20 most powerful dividend stocks to buy @ TheDividendGuyBlog

Tech Stock Readings

-Google buys drone maker @ TechCrunch
-Google getting good at lobbying @ WashingtonPost
-Facebook (FB) to launch payments @ TechCrunch
-The truth about Google-X (GOOG) @ FastCompany

The Stock Market

avatar By: IS
Date posted: 04.17.2014 (4:15 am) | Write a Comment

Benjamin_Graham_3007The other day I ran across this quote which is one of my favorite ones about the markets:

“In the short run, the market is a voting machine but in the long run, it is a weighing machine.”
― Benjamin Graham

I strongly believe in that concept. One clear question though is what the “short run” represents. I’d argue that over  few days or even a few weeks, stocks move mostly based on how “popular” they are but if a stock stays “out-of-value” for too long, a longer term fund or asset manager will end up buying or taking a short position. That is partially what I try to do with my long & short stock picks. My USDP and long term speculative picks are much longer term in nature and depend almost entirely on the actual performance of those companies.

Any thoughts?

The Biggest Battle Yet For Ecosystems ($AAPL, $GOOG, $FB, $MSFT, $AMZN)

avatar By: IS
Date posted: 04.16.2014 (3:00 am) | Write a Comment

threescreensAs i continue to be fascinated by the ecosystem battle that is raging on, it is becoming very clear that there will not be one winner that will take the whole market. Instead, we will have a few strong players that have dominant ecosystems and specific apps will be dominated by players no matter what the ecosystem is. Some of those battles already have clear winners:

-Social: Facebook (FB)
-Search: Google (GOOG)
-Mobile O/S: Apple (AAPL) and Google (GOOG)
-App stores: Apple (AAPL) and Google (GOOG)
-Maps: Google (GOOG)
-Online Commerce: Amazon (AMZN)
-Physical Shipping: Amazon (AMZN)
-Online music: Apple (AAPL)
-Digital books: Amazon (AMZN)
-”Work” Software: Microsoft (MSFT)
-Gaming consoles: Microsoft (MSFT)

You get the idea. Each of those products face serious competition and could eventually lose their lead but at this point, they are dominant.

The Biggest Battle Has Yet To Begin

When we think about financial services, it’s easy to get an idea of the incredible potential. Just think of companies that are actually generating billions through payments:

-Credit cards (Mastercard, Visa, Amex, etc)
-Credit card processors
-Online payment solutions (eBay’s Paypal, Square, etc)

MA Revenue (Quarterly) Chart

MA Revenue (Quarterly) data by YCharts

We do not know how this will play out but it does seem clear that over time, an increasing part of our online and offline payments will be made through our phone. This could be done directly from the O/S, from an app, from the web, etc. It’s also unclear if there will be more than one dominant players in this arena. Already, all of the existing players have been gaining significant ground here in transforming themselves for this new era and it would be crazy to think they don’t have a shot. However, I’d argue that the 5-10 years from now, several of these players will be dominant in the payments arena. They will be able to leverage their existing ecosystems to gain a solid advtange over competitors. Users have already entered personal information and have established connections either through their contacts, messaging apps, etc.

$FBLet’s take a look at how each player is doing:

-Apple (AAPL): Apple is rumored to be making a big push into payments in its upcoming iOS version and with its fingerprint ID technology, making offline payments could become very easy. Apple has a strong market share in the US which would be ideal to take the lead.

-Google (GOOG): While the company has made some progress through the creation of Google Wallets and the gradual implementation of payments by Gmail, it does not seem as advanced so it’s not shocking to hear that it has looked into acquiring Square, one of the leading payments technologies.

-Amazon (AMZN): With hundreds of millions of customers having stored credit card information, the potential is clearly there. Amazon is also working on a smartphone which will reportedly launch later this year which could help and is also looking at payments as a major new segment.

-Facebook (FB): As the world’s most “social” company, Facebook does have an edge here and could clearly leverage its messaging apps (Facebook+WhatsApp) in order to get it started. The company has been working on getting licenses and I personally think that is the exact move that Facebook needs to do. Every time I make a bullish case for Facebook, I express my opinion that user growth is not a big factor in its long term growth. Rather, I think Facebook can leverage its platform in other ways than advertising. It makes little sense to value Facebook exclusively in terms of advertising revenues when it has a billion users and millions of small companies that could be leveraged in other ways.

-Microsoft (MSFT): At this point, Microsoft does not seem ready to make a move here. It’s trying to catch up in a multitude of areas (mobile, cloud, etc) and while the new CEO has looked promising, payments is probably not near the priority.

-Netflix (NFLX) – not a factor here

The Potential Is Significant

When you consider revenues of a few of these players, it’s easy to see how attractive of a business this could become. Yes, it is technically difficult and the margins might not be as great as what they’re used to (apart from Amazon), but it creates a bigger lock-in effect to their ecosystem.

Far From A Done Deal

Though unlikely, alternative digital currencies such as Bitcoin could become the way payments are made in the future. It’s also possible that the ecosystem will not be enough to become significant players in the space although I personally doubt it.

Disclaimer: Long Facebook (FB), Apple (AAPL) and Microsoft (MSFT)

Ultimate Sustainable Dividend Portfolio – April 2014 Update

avatar By: IS
Date posted: 04.15.2014 (3:00 am) | Write a Comment

moneytreeIn September 2011, I did some in-depth research to find long term sustainable dividend stocks and have been doing updates on this Ultimate Sustainable dividend portfolio since then in the attempt to show how well such a portfolio can perform over the long term. I would personally say that things have been going very well and will certainly continue to evolve. I do have a few more things planned which I will discuss in the near future.

The USDP is obviously a critical part of my now very public quest to replace my job income with passive income. you can see my most recent update here.

The last month was a difficult one for the overall markets but the USDP continued to generate steady returns. I will be publishing more analysis of the stocks from the portfolio in the free newsletter. If ever you would like to receive those types of updates, please join, it’s free:

Keep in mind that this portfolio was built by selecting 20 stocks out of thousands. The goal is not to pick the best dividend stocks but rather to pick a diversified, high quality portfolio that will keep dividends increasing over time.

Here are the holdings as of last night to start off:

P.S: Small note. In early March, one of my holdings, DOV, spun off part of its business, KN which I should have included last month, I did this time.

Ticker
Name
Shares
Apr 14 2014 Price
Apr 14 2014 Values
OMCOmnicom Group Inc31$68.87$2,134.97
MSFTMicrosoft Corp73$39.18$2,860.14
JCIJohnson Controls Inc41$46.11$1,890.51
PEPPepsiCo Inc/NC29$83.55$2,422.95
ETNEaton Corp32$71.03$2,272.96
DOVDover Corp25$81.56$2,039
KNKnowles Corp12.5$30.02$375.25
ITWIllinois Tool Works Inc29$81.64$2,367.56
XLNXXilinx Inc38$51.69$1,964.22
SJMJM Smucker Co/The20$95.39$1,907.80
BLKBlackRock Inc12$298.47$3,581.64
TROWT Rowe Price Group Inc30$77.99$2,339.70
OXYOccidental Petroleum Corp23$94.32$2,169.36
COPConocoPhillips26$71.51$1,859.26
XOMExxon Mobil Corp20$97.86$1,957.20
ADIAnalog Devices Inc45$52.46$2,360.70
HASHasbro Inc31$53.65$1,663.15
MATMattel Inc44$38.14$1,678.16
INTCIntel Corp54$26.56$1,434.24
AFLAflac30$61.19$1,835.70
BAXBaxter International25$72.76$1,819
IVZInvesco Ltd68$34.41$2,339.88
VWOVanguard FTSE Emerging Markets61$41.26$2,516.86
BNDVanguard Total Bond Market33$81.54$2,690.82
Cash$337.42
USDP$50,818.45
SPX15.32335164$3,302.90$50,611.55

Dividends Received

Ahhh.. as great as March is in terms of dividends, April is usually much slower and while I will be earnings over 50% more than the same period last year, it still amounts to only about $18. Ah well…As long as the numbers continue to increase, I certainly can’t complain.

usdp2

Ultimate Sustainable Dividend Portfolio News

Not much to report here as no dividend increases were signalled.

Returns

As would expect, the decline in the overall market in the past month ended up helping my returns when compared with the overall market. I am now slightly above of the S&P500 total return index (assuming the same investments).

usdp1

Trades

One thing that I will be doing shortly is probably getting rid of the new Knowles Corp (KN) position which I got through a corporate action. Otherwise, I did end up buying about $1400 worth of my 2 ETF positions, VWO and BND, which now represent about 10% of my portfolio.

Weekend Readings

avatar By: IS
Date posted: 04.11.2014 (3:00 am) | Write a Comment

everythingstoreI continue to listen to the audiobook about Amazon the everything store and find it truly fascinating…! What a company and what a story. Hopefully I can keep listening a bit more this weekend. If you are looking for some interesting readings to end your week, here are a few that I enjoyed:

General Readings

-The future for real interest rates @ FT
-Retirement Advice, Without the Sugarcoating @ NYT

Passive Income & Dividend Readings

-The Rock Solid Ranking is live @ TheDividendGuyBlog

Tech Stock Readings

-Black box strategy @ Stratchery
-Google (GOOG) prepares to launch TV @ TechCrunch
-The resurging Microsoft @ TechCrunch
-Amazon’s annual shareholder letter @ SEC

Should Yahoo (YHOO) Go Down The Netflix (NFLX) Road?

avatar By: IS
Date posted: 04.10.2014 (3:00 am) | Write a Comment

$YHOOIt’s fascinating to see how quickly the ecosystem plays are evolving. They are rolling out new products, acquiring others in order to extend their reach and increase the lock-in effect. At this point, there are 6 clear contenders which in a way already look like winners:

-Apple (AAPL)
-Google (GOOG)
-Amazon (AMZN)
-Microsoft (MSFT)
-Facebook (FB)

Some would argue that Amazon has little to do with the others but I’d argue that over time, they will increasingly compete. Facebook offers a different kind of ecosystem/platform but looks strong and established enough to warrant its spot.

The Difficult But Not Impossible Task

It is also possible for players that do not own their “ecosystem” to do extremely well. It’s a major challenge because the product must be so unique and such a strong brand in order to make it very difficult for those players to launch a competing product or to put significant pressure on pricing, etc. I’ve argued for example that players such as Spotify and Pandora (P) in the music sphere will continue to struggle.

There Is Hope

TripAdvisor (TRIP) and Netflix (NFLX) are two brands that have clearly done very well and are unlikely to disappear anytime soon. Netflix is by far the best example. Why? It has a strong brand, strong content agreements and has started (with great success) to produce its own content. Yes, most if not all of the platforms I mentionned are involved in video and competing to an extent with Netflix. But the video company is strong enough to force its hands:

-Apple features Netflix in its App store and as one of the main apps on the AppleTV
-Google features Netflix in its Android app store
-Amazon just launched its new FireTV which will include Netflix
-Microsoft’s xBox also offers a platform to connect
-Facebook has a partnership to get Netflix users to use “Facebook connect”

Thus, I’d argue, Netflix is in a an ideal position to not only avoid being threatened by those players but instead to profit from the expansion of those players.

Back To Yahoo

There has been talk about Yahoo’s transformation and while building a few apps has been nice, it’s not enough to compete. For all of the discussion about apps such as Yahoo! Weather, they have lost a lot of momentum because it was so easy to replicate. In fact, Apple did exactly that by “improving” its weather app in its latest iOS version. Yes, Yahoo has Flickr but it needs more.

yhooYahoo’s Strengths

I’d argue that Yahoo’s content and core portal is its best product but the problem is that there’s no way the portals will “promote” it. As per “TheInformation”, Yahoo has been trying to buy its way onto handsets in order to get more active users but it’s proving extremely difficult.

The alternative is building something unique that will give enough incentive to users to download that Yahoo can then link all of its apps/content together as Facebook has gradually started to do. It would be a very long term process but honestly, I don’t really see an alternative. In an increasingly mobile world, getting eyeballs is a much more difficult proposition.

Being able to create a video platform that would include exclusive content but also its own shows seems like a bit of a long shot but I do think that if it did work out well, it could become a game-changer.

chart source: WSJ


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