Archive for April, 2012

New Trade: Long Travelzoo ($TZOO) & Short Yahoo ($YHOO)

By: ispeculatornew | Date posted: 04.30.2012 (5:00 am)

It’s been a solid couple of weeks here for the stock picks. Things have been going well and that has helped our average trade get back to very solid levels. That being said, today’s trade was not as easy to find. I did send out some thoughts to the Tech Stocks Newsletter members just this morning with my feelings about quite a few stocks but the valuations are sometimes fairly close to what I believe they should be. In those instances, finding the right trade to add is not as easy so this weekend I did spent a bit more time but I’m very happy to say that in the end, I was able to find a good trading opportunity between 2 stocks at very similar forward P/E ratios, you can take a look at their numbers here:

[table “393” not found /]

Long Travelzoo (TZOO)

 

 

Travelzoo has generally been a good stock to trade for me and it turned out very well went I went long TZOO just days after expressing why I believe Travelzoo represented a great opportunity. Among the companies that I follow, I think Travelzoo is very well positioned to face competition and continue to display strong growth. Thus, it’s P/E ratio seems very attractive at this level.

Short Yahoo (YHOO)

 

 

For some time now, I’ve avoided shorting Yahoo. At first it was mostly because of the possibility that a sale of its Asian assets (such as the very valuable Alibaba stake) would prove deadly to those who had shorted the stock. These days, things seem to have calmed down quite a bit on that front.  That being said, I do think that a lot of the recent moves by Yahoo’s new CEO are very positive and will yield good results. It will take a decent amount of time for those results to turn into increase profits though so I feel like Yahoo’s current P/E ratio is too optimistic.

Disclosure: No positions on Travelzoo (TZOO) or Yahoo (YHOO), this trade will be opened on Monday morning

Weekend Readings

By: ispeculatornew | Date posted: 04.28.2012 (5:00 am)

Very excited for the start of a new era for the Colts as Andrew Luck joins the team🙂 Better days are ahead (although maybe not this year!) for us Colts fans, it will certainly make games more interesting:) Anyway, I’m thrilled it’s the weekend, after a great week on the markets. Here are some readings you might want to check out this weekend:

Valuing the market by P/E ratio @ Monevator
Social Security broke by 2035? @ Bloomberg
Spain about to collapse? @ ZeroHedge
Vladimir Putin secretly richest man on earth? @ Clusterstock

Dividend Readings

McDonald’s (MCD) Dividend Analysis @ TheDividendGuyBlog
Should income investors worry about higher taxes? @ DividendGrowthInvestor

Tech Readings

Apple: By the numbers @ TheBigPicture
Amazon: Wow! @ AllFinancialMatters
Amazon earnings above expectations @ TechCrunch

eBay ($EBAY), A Very Good Investment If You Can Tolerate Some Risk

By: ispeculatornew | Date posted: 04.27.2012 (5:00 am)

I’ve written a few times about eBay ($EBAY), mostly as a believer in the stock. I had also written about how I personally value eBay as an online bank because of Paypal’s growing importance. That was confirmed once more last week when the company announced its latest earnings. Five years ago, Paypal  represented 24% of eBay’s business. These days, it is nearly half of eBay’s revenues at 43% (and still growing faster than the rest of the business). Also important to note is the fact that Paypal is growing faster than the rest of the business and seems to be a higher margin business. So yes, a few years from now, the auction/fixed price ebay.com business will become not much more than a front for its online banking operations.

All of that being said, there are clearly some things that I don’t like about eBay. First off, they do seem to have many more issues such as the one my friend experienced than you would think. Much more critical though is the fact that Paypal will continue to face increased competition. In the online payments sphere. It’s quite impressive that Paypal has remained so dominant and probably a very good idea to start moving towards providing solutions for offline transactions.

Competition remains extremely challenging though with small players (Square, etc), bigger ones (Apple, Google, etc), traditional payment companies (Visa, Mastercard) all trying to get a piece of the pie. Those attempts have been mostly unsuccessful so far despite the fact that Paypal charges relatively high fees. Why? It’s mostly because eBay remains the standard solution, the one that everyone likes to use and which is most convenient. My partner and I pay tons of fees every month to Paypal but it’s still the easiest way for us to both process and receive payments with all of freelancers and advertisers. In many ways, Paypal is to online payments what Facebook ($FB) is to the social web.

[table “392” not found /]

My Fear

I personally feel like eBay is valued at a very attractive P/E ratio these days and will likely continue to go long at some point in the near future. That being said, I still think that at some point, a big player will come up with a solid alternative, as has been the case with Google+ in the case of Facebook. Will eBay’s Paypal be able to fend off such attacks as easily? I guess time will tell. So I would say that eBay is a great play in the medium term with a more uncertain long term outlook.

What are your thoughts on $EBAY?

5 Reasons Why Dividend Investing Rocks

By: ispeculatornew | Date posted: 04.26.2012 (5:00 am)

No regular reader would be surprised by my statement. I thought today might be a good opportunity to take a look at why I’m a big fan of dividend investing as a long term investing strategy. I’ve already explained why I’m convinced that dividend investing will not fade away anytime soon. Sure, moves like the proposed Obama tax increase could cause a slowdown (even though others disagree) but I still think that it’s as effective of a longer term strategy as you can find. Even better, it’s relatively simple to get started with it.

Why Dividend Investing Rocks

#1 Retiring On Passive Income Is Your Best Option

A few weeks ago, I had written about the difference between buying an annuity or a dividend portfolio. My conclusion was as one-sided as you can get with the biggest benefit being that someone retiring with a dividend portfolio who is able to live off of the passive income would leave behind a huge portfolio. The annuity holder on the other hand would not get anything back from the annuity after death. It’s also much easier to not get worried about lacking money when you’re not even touching your capital base.

#2 Realistic Expectations

One major problem I see with many investors, especially those that do not know as much about the markets is that they are constantly looking for homerun opportunities. That next Apple (AAPL), Berkshire (BRK/B) or even Microsoft (MSFT). Of course, those are possible but looking for those is like looking for a needle in a stack of hay. Your odds of finding that homerun are slim and much more likely is that you will keep striking out and end up being left with much less than you’d need at retirement. Dividend investors by contrast generally have much more realistic assumptions about their returns, their investments, etc. Sure, you can argue certain assumptions such as inflation rates or dividend growth but even those are usally not that off as you can see in my post about inflation expectations.

#3 Objective Evaluation

A few weeks ago, Facebook, the company I’d love to hold, bought Instagram for $1B. Many thought that it was a great move. Others thought that Zuckerberg had overpaid and that more moves like this one will happen because of Zuck’s position of power at $FB. The problem is that it’s so difficult to value such companies. How would you possibly know? Even Facebook, which I personally believe is worth north of $100B is incredibly difficult to value. Now think about dividend stocks. Evaluating them comes down to a simple question. How much is stock X paying you every year and how much will that increase over time? We use numbers such as dividend yield, dividend growth, earnings and revenues growth (all described in the top 20 things I look at when judging dividend stocks) but it all comes down to fairly simple numbers. That makes it much easier to determine the value of a stock for a portfolio.

#4 Sustainable Stocks

While there are exceptions, I would argue that in general, dividend stocks are much more sustainable, stable over time and reliable than others. On some occasions, specific companies or sectors (banks in 2008 for example) will cut dividends but I would say that as a whole dividend payers are much more stable than the average investment, especially when you use long term sustainable dividend criteria.

#5 Warning Signs

Since dividend investors usually do their best to dump dividend stocks as soon as the business slows down, they are usually very good about dumping stocks before those stocks start declining. Why? Dividend investors always look for high and sustainable dividend growth and any stock that decides to slow that down or even stop growing the dividend entirely raises red flags. That is usually where dividend investors get out. Standard investors on the other hand will often start hoping for a turnaround or not know exactly which metric should be used.

What are your thoughts on these? Have any others to add?

Closing Trade ($DHX, $MWW)

By: ispeculatornew | Date posted: 04.26.2012 (4:13 am)

This morning I will be closing another trade, as our March 12th trade where we went long Dice Holdings ($DHX) and short Monster Worldwide ($MWW) is currently up 23.67% and will be closed on the opening today. Yesterday turned out to be a very good day thanks in good part to the long $AAPL position!

 

 

Charity Water – Making The World Better – Water Changes Everything

By: ispeculatornew | Date posted: 04.25.2012 (5:00 am)

Why I’m Writing About Charity Today

I’m sure that some of you will stop reading this post very quickly. It was maybe not what you were expecting to see here this morning. Fair enough. For everyone else, here I go:) I’ve been fortunate to start writing on this blog a few years ago. Since then, I’ve received so much amazing feedback, questions and even suggestions that have helped me become a better writer/communicator, a better trader and hopefully have also helped me become a better person as well.

Today, I’d like to give back to the world, do my part. Trading is about making money and I think that for many of us, one thing we hope to do with that money is to be able to give some or even most of it away to noble causes that will help make the world a better.

What is Charity Water

One of the growing trends on the internet is minimalism. Clearly, we do not need that much to live a decent life. One thing that all of us, no matter where we are need though is access to water. Unfortunately, too many still do not have access to drinking water in everyday life. If you hear the very interesting interview with the founder of Charity Water, you will understand exactly what this company is all about.

Why Charity Water and not others

Giving is such a great feeling and helps us make difference in the world. The challenge though is giving to organisations that will be as efficient as possible with those funds. I think that the clarity and transparency that they use is remarkable and should be an example for almost any charity out there. They give us access to see the difference that we’re making, while still guaranteeing that 100% of our donation goes towards the cause. I don’t know of any other type of charity that can say as much. Being in the web space, I also truly appreciate how innovative and viral they have been able to become, how they’ve spread word of mouth. Chances are that you’ve already seen a mention of this charity somewhere on the web, almost all of it is free. I’m not sure why more charities have been able to use the web, despite it being proven such a powerful pool for business, politics and more.

IntelligentSpeculator and Our company will be giving this year

Every year, my partner and I have been able to donate money to our favorite charities on behalf of our company. That is truly a blessing and as the company gets bigger, we are confident that the amount we can give away will also grow bigger. This year, I will be splitting my part of the donation between one children’s hospital and Charity Water. It’s the most deserving charity that I’ve seen in a long time. I also though it would make sense to write about it, try to get others involved. If I can get just a few more of you interested In the project, I’d be so thrilled.

Help in any way you can

I hope that you be interested enough to find out more about the Charity. If so, I invite you to visit their website, follow them on Twitter. If you’re able and willing to give your money or even better your birthday, more power to you. In any case, I’d appreciate if you could spread the word about this charity, they are deserving of our time. So if you can:


Make a donation
Visit their website
-Tell someone you know (send a picture, a video, etc)
-Spread the word on Twitter or Facebook

Closing Trade: Long Amazon ($AMZN) & Short Netflix ($NFLX)

By: ispeculatornew | Date posted: 04.25.2012 (3:36 am)

A few companies that I have positions on announced earnings yesterday so today should be another interesting day with both Baidu ($BIDU) and Apple ($AAPL) expected to move a decent amount so I might have more trades to close but for this morning, the only one I am closing is a successful one where I had shorted Netflix against Amazon on Feb 27th. That trade currently stands at +37.22%.

Everyone Is Obsessed With Apple ($AAPL)

By: ispeculatornew | Date posted: 04.24.2012 (5:00 am)

Has it gone too far? Difficult to say but what is clear is that it seems absolutely impossible to not hear about Apple. It might be worse for me since I work in the investment field. Open a tv, a magazine, a newspaper, or start discussing with friends or neighbours and the tech giant is bound to come up over and over.

Of course, like millions of others, you might be reading this on your iPod, iPhone, iPad or on a Macbook. Which of your friends does not own at least one Apple device? Maybe an even better question would be: “How many former Apple users do you know? Users that tried it and then decided to move to competing products?“. It’s VERY rare.

Has It Reached The Obsession Level?

The question is rather easy for me to answer. As a fanatical user and an investor who has been a big believer in Apple for some time now (although many others saw it earlier), I would have to say that I have. Last weekend I was thinking about my upcoming week which had a few things planned: dinners with friends, meeting my parents, shopping with my wife, etc. And then there was also the Apple earnings to be released tonight. How in the world is that even something to look forward to?

Just try to notice today how many mentions of Apple you will see. I know, I’m not helping that stat much but I trust you are giving me a pass. Plus, if you are reading this, chances are that you don’t mind the Apple discussions too much:) As a very public believer in $AAPL‘s stock, I certainly don’t:)

Should I Be Scared?

You would think that Apple ($AAPL) believers woukd be scared of a miss on today’s earnings but it has happened so infrequently to see Apple disappoint that many of us no longer fear. I personally cannot imagine what Apple could come out with that would make me any less of a believer. It’s a possibility but a very remote one.

Apple Loves It

Apple of course is a master in keeping the obsession alive. How many phone launches have you heard about this year? When is the last one? iPhone 4S? Do you know that hundreds of phones have launched since then and dozens of tablet devices are on the market other than the iPad? Imagine when the much anticipated Apple TV comes out? Do you think the attention it will generate will be comparable in any way to the hottest tv currently on the markets (what would that be?). Of course not! It’s a very powerful thing.

$AAPL Volatility

The biggest issue that I have with all of the attention at Apple is how volatile the stock has become. Think about it. Even 2 or 3 days of the stock declining has made many doubt that the run might be over, that investors are getting out. I mean seriously? Does anyone expect any stock to rise or outperform every single week? Seriously? I have to wonder how much of it is simply the media trying to put Apple in its headlines because it attracts attention more than any other name. Trying to draw conclusions on a small decline when the company is worth $200B more than a year ago is downright insane if it’s supposed to be serious.

That has unfortunately made a lot of very short term investors get involved in $AAPL which will certainly create some outsized gains and losses as more investors try to make momentum/technical plays. I don’t personally mind that much but it does create more noise and more short term volatility. I did also see some investors deciding to get out because they feel like Apple is now much more about momentum than anything else. I personally feel that is a mistake but I can see where they are coming from.

Is It Just Me?

Sometimes I wonder if I’m just like everyone else regarding my obsession with Apple ($AAPL) and Facebook ($FB) stocks. Maybe you are not and have suggestions to help “cure” myself? Or maybe I’m more normal than I could think?:)

New Trade: Long Zynga ($ZNGA) & Short Blue Nile ($NILE)

By: ispeculatornew | Date posted: 04.23.2012 (5:00 am)

It turned out to be a rather calm week both for my trading and in the markets. A bit down but nothing too serious, and certainly not as bad as some expected given the continuing European crisis. In the tech space, it was a very interesting week with earnings for a few companies such as Yahoo ($YHOO), Microsoft ($MSFT) and Google ($GOOG). The coming week will be a huge one though with Apple ($AAPL) about to announce amid a lot of speculation. It should be VERY interesting. Today, I am back with a new trade! Here are the numbers for that trade:

[table “391” not found /]

Long Zynga (ZNGA)

I’ve discussed Zynga quite a bit as a great play on Facebook ($FB), it’s been a tough company to figure out as there isn’t that much news being released and it’s unclear how things are going with increased competition from other gaming companies. I do think that if it can do anywhere close to what most expect, it will prove to be a great trade as its forward P/E is almost identical to Blue Nile’s, which is crazy on many different levels.

Short Blue Nile ($NILE)

Ahh Blue Nile, the stock I love to hate. I’ve been short over and over and over, almost every time with great success, especially this year. The company is clearly a lot less overvalued than it was a few months ago as its fundamentals have more or less stayed the same while its price has declined. These days, I wouldn’t short NILE against any stock but Zynga (ZNGA) is a good candidate given their drastically different growth rates and opportunities but comparable P/E ratios.

Disclosure: No positions on NILE or ZNGA

Weekend Readings

By: ispeculatornew | Date posted: 04.21.2012 (8:03 pm)

Well well well… With Facebook finally announcing its IPO date (May 17th), the next month should be very interesting:) Then next week there are Apple earnings, the NFL draft (where my Colts will draft Andrew Luck! Yahoo!)… ! So this week is all about resting and watching some NHL playoffs:) How about all of you? Hoping all of you are doing well!

The man who broke Atlantic City @ The Atlantic
Are High Yield ETF’s The Latest Trend? @ BuildYourETFPortfolio
Don’t expect to spend over 4% of your assets annually @ CuriousCat
Spring Cleaning Our Passive Investing HQ @ Menvator
How does your income stack up against fellow Americans @ Darwins Money
Why reserve numbers matter for oil & gas @ BeatingTheIndex
5 things Tim Tebow can teach us about stock investing @ BalanceJunkie

Dividend Readings

Dividend investing guide @ DividendMonk
Dividend yield should not matter for dividend investors @ TheDividendGuyBlog
Dividend investing misconceptions @ DividendGrowthInvestor

Tech Readings

Google Q1 Earnings @ ZeroHedge
Microsoft beats estimates @ TechCrunch
It’s not about Instagram, it’s about mobile @ TechCrunch