Archive for December, 2011

Happy New Year!!!

By: ispeculatornew | Date posted: 12.31.2011 (5:00 am)

For most of you, today marks the start of a New Year. With that usually comes wishes and resolutions. I’ll start off by wishing you all to live your dreams, have quality time with your family and friends, and being healthy.

As for resolutions, I guess we each have some and I’m personally one who believes a lot in these. So far, I’ve usually been able to make most of them work to a good degree which probably helps me come back with more. In terms of investing, I’ve discussed some of my objectives and I will also obviously be putting efforts to save even more in 2012 than what I did last year. I think that while getting good returns is clearly more fun and exciting, the best way to add to our portfolios is just adding a bit more every month than we’ve done in the past.

I’m excited for 2012 to start and I hope you are too, Best Wishes And Thanks To All Of You Who Read, Write Comments and/or emails, I truly appreciate it and feel blessed to have these relationships with you,

Remember, life is short, live every day as if it were your last one,

Best wishes,

IS

I’ve Got Butterflies In My Stomach

By: ispeculatornew | Date posted: 12.30.2011 (5:00 am)

Like everyone else reading this blog (or most of you at least), I am very much looking forward to starting 2012, especially to start my 2012 technology stock picks again. Don’t get me wrong, I love doing these picks, and I’ve certainly missed doing new picks in the past 3 months.. That being said, I’m nervous about doing the next ones. Why?

Putting It All On The Line Again

Many say that traders are only as good as their most recent returns. I don’t entirely agree but I do understand the idea behind it. Just think about it this way. The last time I opened a new trade, I knew that the difference between an amazing trade and a bad trade would likely be finishing 2011 with a return of over or under +50%. I think you’d all agree that while the return of 75% or so is incredible, being a bit lower would still have had a huge impact. I can’t imagine anyone thinking much less of me simply because the 2011 would have been “only” 50%.

Back To Square One

That being said, in a few days, I’ll be right back on the start with a 0% return in 2012. That means a few bad trades to start off the year would have a huge impact on the return obviously. Things might start off well as they have in both 2010 and 2011 but they could always turn out bad as well. Let’s face it, even with these great returns, I’ve made almost as many bad trades as good ones. The chances of starting with 2-3 losing ones is not that small.

What Happens If I Start Off The Bad Track

The big question of course is how it might (or not) affect me if I made 3-4 bad trades to start off the year. How much would I question myself and would it affect how I would do my trades? I would like to think that 3-4 trades would not be enough to shake my confidence but that is probably underestimating the emotional aspect of trading. That is also why no matter how things go, I will probably discuss the psychology of trading a lot more in 2012. Hopefully I won’t become a case study of how things can go wrong:)

Not Much I Can Do At This Point

I will likely open 2 or 3 new trades next week and at least one more the following week. That should help “diversify” my risk. If you are interested in these long and short tech stock picks, please be sure to join our free newsletter about technology long and short trading here:

That being said, I hope you will have a wonderful weekend, ,

IS

Looking To Oil For A 2012 Dividend Play… (RDS/B, XOM, COP)

By: ispeculatornew | Date posted: 12.29.2011 (5:00 am)

In the past, we have looked at many different sectors for dividend stocks and one of the more promising ones has been companies in the oil & gas sector. In fact, one of the few criticisms that I received for the Ultimate Sustainable Dividend Portfolio has been being perhaps a bit overweight in oil/energy stocks. That is certainly something that I will be looking at as is the idea of having more international exposure in that portfolio. For that purpose, today I will be looking at two of the stocks that did make the cut, Exxon Mobil Corp (XOM) and Conocco Philipps (COP) in order to see if Royal Dutch Shell might be a better pick than those two. To be fair, you could argue that all 3 companies have a fairly significant international component but I do think that RDS/B might be a good addition here. To judge them, I will use sustainable factors but also the top 20 things that I look at when judging dividend stocks.

Dividend Metrics

[table “348” not found /]

Exxon Mobil Corp (XOM) 

Conocco Philipps (COP)

Royal Dutch Shell(RDS/B)

I think that you could maybe argue that Conocco Phillips (COP) might have a better profile give the growth in recent years but since Royal Dutch Shell pays almost 1% more already, I would still likely side with RDS/B, with the only worrying point being that dividends have not increased in nearly 2 years. That is certainly cause for concern.

Company Metrics

[table “349” not found /]

In terms of sales, Royal Dutch Shell has been growing its numbers very quickly while earnings growth is strong but comparable to its two US based competitors. The bigger worry though is that the payout ratio for RDS/B is much higher (almost double COP and XOM) which will certainly leave less place for improvement.

As well, Royal Dutch seems to have a bit higher debt than XOM for example.

Stock Metrics

[table “350” not found /]

Industry Metrics

I don’t think there is any doubt that the outlook for oil prices is very uncertain. It is very much tied to the world economy and there are still many questions about China, Europe and even the US economy. How oil will react looks more like a guess in the short term. I do however think that the longer term outlook remains very strong. The demand continues to climb much more quickly than producers can improve capacity (when even possible). These companies are profitable, have little to no debt and while there is competition, the big players are the same year after year and I don’t think anyone expects one of them to outperform the others significantly.

Fit Within Your Portfolio and Sustainability

I would probably argue that the Ultimate Sustainable Dividend Portfolio was perhaps a bit too weighted into oil stocks and will probably adjust that over time. That and the lack of international exposure are probably the two biggest flws as of right now. That being said, I still think the portfolio is exceptional and will perform very very well over time. It’s also very important in my opinion to include some oil/energy stocks in your dividend portfolio. These companies generally have very stable revenues, and are able to pay consistent and solid dividends. It’s also important to note how sustainable and long term these companies are. Oil might eventually go away but probably not in our lifetimes and in fact, it is likely to become much more valauble before that happens so I personally do not worry very much about the prospects for these companies. If I had to pick, I think I might still pick the two same ones although you could easily argue that Royal Dutch Shell would make a great pick, especially if it resumes dividend increases.

Do You Trust Your Government?

By: ispeculatornew | Date posted: 12.28.2011 (6:00 am)

A few weeks ago, I wrote a post about how to invest when our country is going bankrupt. Still to this day, I get comments, reactions and ‘tweets” almost every day. It does seem like many are worried about these types of scenarios. One of the things that concerns me the most is that I don’t trust the government would ever tell us if things did get serious… Or they would, but only when it would be too late. Right now, tens of European leaders continue to work on finding solutions for countries like Greece, Ireland but also the big ones like Italy and Spain. We know that Italy is paying almost 7% of any newly issued debt and that such a rate is unsustainable. But do you feel like the Italian government would ever tell its citizens if things got really bad?

History Says It Wouldn’t

Look at recent economic or financial issues such as Argentina and Russia and you’ll see that those that were taken by surprise the most were the citizens of those countries. Obviously, it’s easy to understand why. The whole system, from banks to currency and the government is built on one fundamental; trust and confidence in the system. For example, if banks only hold a few % of the deposits that you and I made (they ledn out the rest), it does not take that many people withdrawing all of their money to create major issues. The whole system is built that way.

Is The Truth Hidden?

Remember all of the huge discussions and debates that occurred when the government did a $700B bailout package? Many were against it but in the end, it was judged that it was better to go ahead. What is less clear now that this has been made public is why the Fed made nearly 10 times that amount, $6.8T, available to financial instutions. Why? Many believed that the whole system was on the verge of a collapse and that huge banks could start going down left and right. I don’t think anyone would ever say that letting that happen would have been the right thing to do. It might have made things even worse to let everyone in on the real story of how bad things truly were.

But I Still Wonder…

What other things do we not know right now? How close is Europe from collapsing and what kind of consequences would such a failure have? I don’t know about you but while I’m not going to start a panic movement, and accumulating food and water in my home, I do keep this in mind when deciding what to do with my money.

How about you? Do you trust your government? Do you consider such things when deciding what to do with your money?

Adding A New Stock To My Radar: Tripadvisor (TRIP)

By: ispeculatornew | Date posted: 12.27.2011 (5:00 am)

I guess I didn’t do my homework. Or something like that. I’ve been discussing the Zynga (ZNGA) and Facebook IPO’s over and over but one of the most interesting web companies turned public and I didn’t even say a word about it (I did mention it on Twitter but it was late). Good thing for me is that I’m not the only one. As much I’d love to blame the Christmas Holidays for my miss, the truth is that this one went under everyone’s radar.

Why TripAdvisor (TRIP) Was Barely Mentionned

The biggest reason in my opinion is that this company did not go the more traditional route of being private and then going for the IPO. Instead, it was bought a few years ago by Expedia (EXPE) which decided to spin it off earlier this month. I’m not sure why Expedia did not put more of an effort to make this more public.

I’m Not Complaining Though

Believe me, I’m more than happy to see Tripadvisor go unnoticed. Why? It certainly looks like the company’s valuation is lower than it probably would have been. Right now, TRIP is trading at a valuation of $3.5B or so. That is a bit over half of Zynga’s (ZNGA) valuation with revenues also close to being half of its competitor. You might think that I’m crazy to compare the two. Obviously, I beg to differ.

Zynga And Tripadvisor Are Both Plays On Social

While Zynga has an incredible team of designers and programmers, the thing that sets it apart from competitors such as Electronic Arts and Blizzard is the fact that it was able to acquire a dominant position in social, especially on Facebook. As the web moves to a more “social” environment, that is proving to be key. In a similar way, Tripadvisor is also a leader in its sphere from a social perspective.

If you don’t know Tripadviser, it is the leader in travel guides. It offers the possibility for visitors to view hotels, restaurants, things to do, find out how others liked their time, what their Facebook friends did and who has visited a given place. It’s by far the paradise for those booking travel from the web (increasingly everyone!). The best part is that all of the content is built by users while Tripadviser staff and engineers can focus on the structure, features such as the Facebook integration, etc.

How TRIP Makes Money

Basically, every time a user decides to book a hotel or restaurant, Tripadviso tries to make an amount of money off of that reservation. Because of that, the company has been profitable for almost 10 years now. I encourage you to view the video below if you’d like more information about the company.

The Concerns Regarding TRIP

There are certainly downsides in Tripadvisor’s business, like most new digital companies (or all of them for that matter). The two main ones in my opinion are:

Competition: There is no doubt that many powerful players including Google are going after the local market. I still think that Tripadviser’s “travel perspective” remains unique and basically unchallenged. Also, it will be a significant challenge for players like Google to build such a site. Personally, I think that the competition factor is less important than for players like Zynga.

Reliance On Community: There is certainly the potential for any social player to screw up big time. Companies like MySpace managed to screw up big time and allienate their users to the point where they all left. I think this remains a risk, especially as a public listed company with shorter term horizons. So far, the company seems to be able to manage things in the right way and continues to get increased respect from the travellers community. It does remain a risk, but not a significant one in my opinion.

High Margins

The incredible feat for companies that let users generate the content such as Facebook, LinkedIn (LNKD) and Tripadvisor is that they can turn very significant margins. Why? Their costs are very limited. Over time, I think that will prove to be a critical factor and I personally give a lot more credit to revenues from a company like TRIP than others like ZNGA and Pandora which have to spend big to acquire and produce content.

What Will You Be Working To Improve Your Investing In 2012?

By: ispeculatornew | Date posted: 12.26.2011 (5:00 am)

We are exactly in the middle of those days where so many of us take New Year resolutions, things that we will start doing, be more consistent at and also those things we want to avoid going into the New Year. Last week, I discussed the few changes that I will make related to my long and short technology stock picks. There are many other financial and investing goals that I will attempt to do, mostly trying to be smarter with my money and my spending which will hopefully translate into more savings.

In terms of financial decisions, finding some money to be saved in insurance and other recurring expenses will probably be the best way to get it done. If I can find a $100 per month for example and increase my automatic savings by that amount, it will end up making a very significant difference.

From an investment perspective, I am hoping to invest significant amounts into:

The best investment I have made in my life
-Some longer term speculative picks… Zynga (ZNGA) is one possibility, LinkedIn (LNKD) at the right price, another option that I will discuss later this week and obviously some Facebook stock if it comes out anywhere close to a decent valuation.

From a blogging perspective, I hope the quality of posts on this blog will continue to increase so that it can hopefully keep up the growth. These days, the blog has between 500 and 1000 readers on almost every day, and I’m hoping that all days will be over 1000 by this time next year. Again, I appreciate all of your feedback in helping me making this blog more interesting and relevant.

And more than anything else, more time with my family – I think we all realize more and more over the years how valuable our close friends and family truly are and I am going to be focusing on the 20/80 principle more than ever before. Why? Because that is what will help me get more results in every aspect while also managing to get more free time to spend with my loved ones.

I would love to hear about your 2012 resolutions and objectives, thanks for being part of this growing community.

Merry Christmas To All Of You

By: ispeculatornew | Date posted: 12.24.2011 (5:00 am)

Hi everyone, today, the post will be short and quick, I would like to wish you all a Merry Xmas and Happy Holidays. May you be able to spend quality time with all your loved ones. I thank you all for making this blog what it is and hopefully it will continue to grow over time.

Merry Christmas to all of you,

Sincerely,

IS

You’d Be Crazy To Not Own Apple (AAPL)

By: ispeculatornew | Date posted: 12.23.2011 (5:00 am)

I know, it’s the least original idea to be bullish on Apple. Everyone is. The average analyst rating according to Bloomberg is 4.7 (out of 5). Only Google (GOOG) and Baidu (BIDU) score better and barely so. It just feels like I’m every day, thousands write about owning Apple. You’d think I’d want to stay away from the crowd right? How often does following everyone else turn out to be right? Very rarely, I’ll tell you that. Just look at gold these days. Seems like a few months ago, buying gold was the new “risk free” way to make money. These days, everyone is running for the exits…

Hear Me Out

I’m glad to see that you’ve kept on reading. I’m not trying to just be a “me too” guy over here. But Apple is dirt cheap and I think it’s crazy that the stock has not increased more. When I compare it to the other stocks that I follow, it comes out as one of the safest and undervalued investments. Rarely do those 2 words come together. Let’s look at a few numbers to start off. In the last 4 quarters, Apple has reported earnings per share of $27.67 and is trading at $400 or so… that is a trailing P/E of 14,5 or so. Very good right? Estimates are for the current P/E to be 13.81 and next year’s P/E to be just under 10, at 9.83.

Let’s take a look at all of the cheapest companies in terms of forward P/E (excluding Chinese companies which are a bit more complex) from the stocks that I follow:

[table “347” not found /]

Tell me, is there any stock on this chart that even compares to Apple? Some might outperform without a doubt. But I would put all my chips on Apple if I had to choose. Just take a look at Apple’s revenues growth in recent quarters:

Is it recession proof? It’s not very far. Some might say that growth will slow down and they might turn out right (eventually they will) but even 10-20% growth would be a bargain at this price.

The Upside

The biggest thing about buying Apple is that not only is the downside very limited, but there is also significant upside. The mobile market continues to explode and I don’t think anyone would argue that the iPhone is losing momentum. It does face very stiff competition but things are still going strong for the Apple. Add to that the iPad which continues to see little to no competition in the tablet market.

2012 will see the launch of a new generation of iPad’s, perhaps a smaller version and will likely see the launch of the iPhone 5, all of which will certainly turn out to be huge winners. As if that wasn’t enough, Apple seems to be almost ready to officially launch Apple TV. Steve Jobs hinted in his last days that he had finally figured out tv and most analysts expect Apple to launch the product in 2013. Will it be a hit to the level of the ipad/ipod/iPhone? Perhaps but I don’t even think it needs to be THAT successful.

Steve Jobs Factor

Honestly, the only knock that I can see regarding Apple is the uncertainty created by the departure of Steve Jobs. That could certainly create issues but so far things do seem to be on pace and I think that if that is the knock against Apple, it is way overblown.

Are You Bullish On Apple?

I would love to hear from anyone that thinks I’m way off here. What would I be missing? If Apple is overvalued, what would you rather buy? Especially in the technology sector?  In case you have missed that, if nothing crazy happens between now and the year end, Apple will be one of the first stocks that I will end up going long on when stocks picks resume in a few days.

Disclosure: No position on Apple

An Important Component Of International Dividend Investing: Withholding Taxes

By: ispeculatornew | Date posted: 12.22.2011 (5:00 am)

Last week, we took a look at some of the better dividend payers from all around the world. Many pay considerable dividends and offer good diversification which certainly makes them attractive picks. A few visitors were quick to point out that withholding taxes can have a significant impact on those dividends.

What are withholding taxes? 

When a foreign company decides to pay back its investors through dividends, there is often a part of that amount that is taken by the government where that tax is being paid. For example, foreign investors that decide to a buy a French stock will receive a dividend like any others but the French government (and almost every other government in the world) takes part of that income. Why? There are many reasons but it’s a form of tax on money leaving the country. These are not necessarily easy to track but they are generally between 0% and 30% depending on the country.

An Example

Suppose that an investor receives a dividend of $100 from that French stock.  The investor will end up only receiving $75 as the French government will take a 25% cut. That is one of the most expensive countries to buy stocks in and is certainly worth considering when looking at those attractive dividend yields.

It’s Not All Bad Though

It’s important to remember that you end up paying taxes on US dividends as well. The main difference is the rate (lower in this case but that’s not always the case) so you are simply paying this amount of taxes upfront rather than when filing your taxes.  Another key point is that in almost all cases, there will not be “double taxation”. That means that the dividend that you receive will not be taxed by the US government since you already paid your share to the French government.

Each Country Is Different

It’s important to look carefully at the rules for each country. Some have higher rates, others are lower, for some you don’t get hit by withholding taxes in your non-taxable accounts, etc. I don’t think that these things make a huge difference in most cases and it still makes a lot of sense to add international dividend stocks to almost any portfolio.

Have You Had Any Experience With Withholding Taxes?

Are Markets Too Volatile? 7 Ways To Protect Your Portfolio

By: ispeculatornew | Date posted: 12.21.2011 (5:00 am)

One of the questions that I get the most often is how to protect a portfolio. I think that many investors are scared these days. Why? Markets have been more volatile in recent months and it’s scary for everyone involved. Especially those that have less years to make up any potential losses. There are many different reasons why markets have reacted so violently. The first one would be the whole credit crisis that makes it unclear what Europe (and indirectly the world) will look like a few years from now.  That, the uncertainty around banks, real estate prices and more have greatly diminished investor’s confidence.

All of those would be enough to make markets volatile but when you add electronic trading, high frequency traders and hedge funds, it seems to add to the violence of moves. The fact that big movements in the markets then setup new trades from all of these investors seems to make movements even more violent. Are markets too volatile? I personally don’t think so. If markets go up and down 2-3% every day but the end result is not significant, it should not make a big difference to most of us. In the end, most of us are trading with a long term perspective right?

How To Protect Your Portfolio?

One of the most common questions that I get when markets are so volatile is how to protect such a portfolio from big movements. There are no easy or clear answers but here are the main strategies that can be tried. I think it’s important to start off by doing these 2 things:

-Do not worry about short term movements (markets crashing for 1 day and rebounding the next one is not a cause for worry)
-Do not panic (trades and moves made when someone is anxious, upset or scared are almost never good ones)

Here are the main things that you can add into your portfolio. Any movements should be done gradually over time to reduce the volatility of your portfolio. It is almost never a good idea to start selling right away when markets decline. Gradual moves though can improve the performance of your portfolio over time.

7 Ways To Protect Your Portfolio

Only Invest What You Can Afford To: There is no issue in holding some cash in your portfolio. I personally do not invest anything that I cannot afford to suffer significant (15-20%) losses on.. if you have trouble sleeping because you worry too much, you probably should hold less stocks and more cash.

Improve your asset allocation: You should not have all of your eggs in equities or in bonds. Ideally, you have a mix between the two. It seems simple but that is probably the most significant

Do Not Use Leveraged/Inverse Products: Many products are sold as a way to protect your portfolio. Such products are generally build with very short term goals in mind and it’s not what you should be using for longer term strategies.

Improve Your Diversification: I love technology stocks but holding Google, Apple and Microsoft will provide very little protection in market downturns. It’s important to try to hold companies in different sectors that will help you perform better over time. This also means having more international stocks.

Hold Alternative Assets: Buying inflation protected bonds, gold or other commodities can help diversify your portfolio. It’s not the first step I would take but as your portfolio becomes bigger, such strategies can certainly make a big difference.

Pay Attention To Fiscal Impacts: One of the biggest mistakes that investors do when they panic is selling their biggest assets. That may or may not be the best decision. But you should always look at the taxes that will need to be paid. You might have lost $10,000 on a stock and want to sell but if you had made significant profits in previous years, you will be stuck paying capital gains taxes on those.

Focus On The Right Metrics: I discussed how dividend investors that are using a dividend portfolio to build income should focus on the income that the portfolio generates rather than every day’s profit and losses and that can be true of any portfolio. Keep in mind that market losses means you are able to buy more of those assets which is a good thing. It might not feel that way but if you take the right perspective, you will not feel as much panic.