Archive for September, 2012

Weekend Readings – Trading Drunk & Ultimate $FB Buy Signal?

By: ispeculatornew | Date posted: 09.28.2012 (5:00 am)

When is the last time you started trading after a few beers? Doesn’t sound like a good idea? You might want to read this story from the Telegraph that explains what happened to one trader who gave it a shot:) I also loved the Barron’s cover from a week ago… It’s usually a good bet to do the opposite of what such magazine covers write so I’m feeling great about my long position:)

General Readings

What business is Wall Street in? @ BlogMaverick
Mitt Romey vs Mr Burns @ MadMagazine

Dividend Readings

We launched our much anticipated DividendGrowth ebook @ TheDividendGuyBlog
Walgreen (WAG) Dividend sock analysis @ DividendGrowthInvestor

Tech Readings

What will Marissa do? @ AllThingsD
Great iPhone but maps screwup @ TechCrunch
Why an arrogant Apple should take note of the Blackberry breakdown @ Wired

Social Stocks Are Not Dead: Facebook ($FB) vs LinkedIn ($LNKD) – Which Is A Better Buy?

By: ispeculatornew | Date posted: 09.27.2012 (5:00 am)

I looked at these two stocks some time ago and while I loved LinkedIn and had acknowledged that I might regret it at some point. Why? Because I thought LinkedIn was a terrific company that was simply a bit too expensive for me.

Social Stocks/Companies Are Not Dead

Many of you know that I’m long Facebook (FB) so it’s not a big surprise that I think the “death” of social stocks such has been overstated. Yes, Facebook’s stock has declined greatly as has been the case for Zynga (ZNGA), Groupon (GRPN) and others. That was mostly about valuations though and while I still think that Facebook is a great buying opportunity right now (I know, that is so not the “trendy position”), clearly investors disagree. That’s great. I’m clearly not investing on Facebook based on the growth of its display ads business in the next 3-5 years. I’m betting on the fact that much more exciting and profitable things will come around.

Facebook and LinkedIn Are Worlds Apart

Yes, they are both social stocks but apart from that, they are different in almost every way.

User Segment: While Facebook has a billion users from nearly everywhere in the world, every walk of life, etc.. LinkedIn has mostly focused on working professionals. That has profound impacts on what the users expect from the social network.

Revenue Sources: Facebook has mostly been about display advertising on its site, the sidebars and more recently user news feeds. LinkedIn has been able to do some of that but also focus on selling premium memberships to recruiters, companies, etc.

Untapped Potential: Facebook could go in so many different ways. It could become the default way to pay and identify ourselves on the web, could become a giant closed platform (similar to Apple in some ways), etc. LinkedIn on the other hand will probably end up taking away a lot of business from companies such as Monster Worldwide (MWW), Dice Holdings (DHX) but also become one of the premiere sources of data for human resources consultants, etc.

Visibility: Because in part of their different audience but also their leadership, they have very different levels of visibility. Facebook’s every move is met with analysis. Just think of how much its recent IPO was analyzed when you compare it with the LinkedIn one. LNKD seems to be able or willing to fly under the radar a lot more which certainly has its pros and cons. Facebook has also been a lot more challenging to deal with for the web giants like Apple and Google.

If you ask me which of these two companies I think has a better shot of doing well and dominating its market 5 or 10 years from now, I’d probably say LinkedIn. I think the brand is terrific and it has been doing all of the right things. That is not what it’s all about though

Let’s Take A Look At Valuations

First, the broad revenue numbers:

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Then, we can compare revenues and profits. I think it’s likely that LinkedIn will have significantly higher margins in the future because its costs are lower and it has higher margin activities (memberships, products, etc).

First off, let’s look at how revenues have evolved in recent years. Obviously, 2012 and 2013 numbers are analyst estimates. In terms of revenues, they should probably be considered in terms of their valuations. All things being equal (which they’re not), Facebook would have 3.95 times as much revenues given its market cap is 3.95 higher ($49.2B vs $12.45B):

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The higher has been trending lower which surprises me given the higher margins I’d expect from Linkedin.

In terms of earnings per share, I’d expect the EPS ratio to be about 5.72 times higher for LinkedIn given the fact that its stock price is that much higher ($118 vs $20.62):

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Again, this is where I get stuck. I love LinkedIn’s company, its fundamentals, its future prospects, and I’d never dare short the stock. But it is making less than twice what Facebook makes per share and is trading nearly 6 times higher… yes there is less risk involved but it still seems expensive to me. I might still become a buyer at some point in the near future but for now? I’m still more bullish on Facebook at these prices. How about you?

Disclaimer: I do have a long position in Facebook (FB)

Looking For An International Dividend Treasure ($SNP, $YZC, $CHL, $BHP, $SSL, $SNP)

By: ispeculatornew | Date posted: 09.26.2012 (5:00 am)

In my quest to build a solid and diversified passive income cash flow, having a solid sustainable dividend portfolio is a major part of that both currently and in the future. Last week, I had a mission of looking through hundreds of US listed international companies that could be good candidates to add international diversification. I did end up coming up with 6 names which  I decided to look into today. I will be using the top 20 things that I look at when judging dividend stocks.

Dividend Metrics

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Obviously, there are many strong names here and I also looked at the longer term history of these companies. SSL is without a doubt my top name with all of the other names coming in close. YZC’s numbers look extremely impressive but they have not been as consistent, pay an annual dividend and have less history.

Company Metrics

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Many more strong candidates but I have to say that YZC looks incredibly solid doesn’t it? Many of the others also have important strengths!

Stock Metrics

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It becomes difficult to judge this criteria only but obviously the top trend analysis score is China Mobile.

Industry

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Many different industries here but it does seem like materials/energy are strong. I guess the main point here is that all of these candidates could be very strong candidates for your portfolio, it largely depends on what the best fit is. For the USDP, I already have a lot of money invested into energy stocks so that is one sector that I am staying away from. I would be very tempted to go for YZC or SSL… how about you?

Disclosure: No positions on these 6 stocks

Passive Income Targets – September 2012

By: ispeculatornew | Date posted: 09.25.2012 (5:00 am)

After starting this new series last month, I received a lot of positive feedback. Every month. I talk a lot about the need accumulate different passive income flows. As time goes by, my objective is to be able to live entirely off of these new income streams. In many ways, that is what’s behind my interest in dividend income. For now, I prefer to avoid using actual numbers (might change later on) so what I will do is express all of this data in %. The objective of course is for all of these flows to end up generating 100% of my current income. In terms of income, I will be using my gross household income. Counting the bonus would only make things more difficult to track and would not represent how I currently live on my finances.

For example, if my base salary is currently 100K, my objective is to make 100K of passive income on an annual basis. This could be done through a variety of methods which I will be exploring of course.

Why Am I Doing This?

I’m a strong believer in working with clear objectives but also holding myself accountable so writing about these objectives will without any doubt help me reach financial independence more quickly.

Current Passive Income Flows:

3.6% – Dividend/Investing Portfolio: I am currently generating a dividend yield of about 3.50%. This portfolio will be increasing over time, especially on year end bonuses. I use a bucket system which I will be writing more about but the main retirement components are a long term dividend portfolio (see the Ultimate Sustainable Dividend Portfolio) and an ETF portfolio (see BuildYourETFPortfolio for more details on how I build mine).

4.8% – Private Investment In My Online Company: I have discussed how my web company has been the best investment of my life so far. Currently, the company is paying back very little as it is focused on repaying debts (we acquired a few companies, see more on TheFinancialBlogger) and we are still very much focused on growth. This certainly has the potential to increase over the next few years but probably not until 2013.

Total: 8.4%

It’s not spectacular by any means yet. That being said, I am 31 years and do have a decent base (I could live with less easily).. I will continue to work on getting that total as close as I can do 100%:)

Passive Income Ideas

0% – Real Estate: One thing I’d certainly like to own at some point is real estate that would generate very diversified, consistent cash flows. The main challenge will be that I’d prefer not spending much time working on it but we’ll see what I can figure out.

0% – P2P Lending – This is a new idea which I will certainly discuss in the near future, one that could add some extra passive income

0% – Annuity – No intention of buying an annuity for the time being

0% – Other ideas – I could end up starting other businesses or proejcts will I’ll certainly keep you posted about.

What I Am Not/Will Not Include

Pensions: I do know that the government will be paying me a sum of money once I retire. However, given how poor government finances look like these days, I personally think it’s crazy to count on the government actually fulfilling its promises. It won’t happen. Yes, there will be money, but not anywhere what is currently being promised. Whatever I do end up getting will be a nice surprise.

I feel like I am being extremely conservative here. By not including my government pension and also not including the fact that lower revenues will mean less taxes to be paid, I’m overestimating the amount of passive income that is truly needed. That is more than fine by me. I’d also like to think that my house will be paid by then making my level of spending lower all things being equal.

Do you have any questions or comments? I’d love to hear any ideas or how you’ve been managing on your end as well!

Launching The Dividend Growth eBook

By: ispeculatornew | Date posted: 09.24.2012 (3:47 am)

Today is a very special day! After writing our free Dividend Investing ebook (which has been downloaded nearly 25,000 times!!), my M35 partner Mike has now written a much more advanced ebook that is available for sales on Amazon, you can find out more about it on TheDividendGuyBlog.

There is both a US and Canadian version that looks into the tax effects of each country!

DGB

Take A Look Now by clicking here

Closing 2 Trades ($LNKD, $P, $BIDU, $AOL)

By: ispeculatornew | Date posted: 09.24.2012 (2:30 am)
I had announced that no new trades would be added as part of my long & short tech stock picks for the rest of the year. That being said, I still had 7 live trades and I will be closing out 2 of those this morning on the open.

Long LinkedIn (LNKD) & Short Pandora (P) +24,23%

This trade has been mostly about LinkedIn, a stock and company that has been extremely impressive despite the already high expectations

Long Baidu (BIDU) & Short AOL (AOL) -21,82%

Clearly, I’ve struggled in evaluating AOL (AOL) this year but Baidu has been an even bigger surprise as the Chinese economy continues to look very shaky

Give to Charity: Water

By: ispeculatornew | Date posted: 09.21.2012 (5:00 am)

Today, I just wanted to share the fact that I will be giving to Charity Water for their September project, please join me:) If only one of you does, I’ll feel like this post made a real difference in our world:)

Find out more about their latest project here:

Live Video from Rwanda on charity: water’s 6th Birthday from charity: water on Vimeo.

Weekend Readings

By: ispeculatornew | Date posted: 09.21.2012 (5:00 am)

Happy Friday! Today I wanted to start off by congratulating blogs that won this year’s Plutus Awards, including Mike from Oblivious Investor for best investing blog! It is well deserved! I wish you all a great weekend, here are some interesting links if you have the opportunity!:)

General Readings

Now I Know Where I Stand Financially @ DarwinsMoney
Passing the CFA to increase compensation @ SmartFinancialAnalyst
Why Rich People focus on earning @ HopeToProsper
Do like Steve Jobs; don’t follow your passion @ FastCompany
Mitt Romey vs Mr Burns @ Mad Magazine
Your taxes at work, who is paying what? @ ZeroHedge

Dividend Readings

QE3 Since when is pushing on the accelerator.. @ TheDividendGuyBlog
Is Johnson & Johnson (JNJ) A Good Buy? @ DividendMonk
Cramer’s top dividend picks @ ThePassiveIncomeEarner

Tech Readings

Walmart done selling Kindles? @ TechCrunch
Adobe misses on Q3 sales @ TechCrunch

6 International Dividend Stocks You Need To Look Into

By: ispeculatornew | Date posted: 09.20.2012 (5:00 am)

Today I am back with a deep look into international stocks that could and should be added to your own version of the Ultimate Sustainable Dividend Portfolio. I started off by looking at some of the top listed ADR’s in terms of dividends while staying away from pink sheet stocks! I also removed stocks that did not have a price of $5, etc.

That helped me reach a number of stocks that certainly have solid potential for greatness. Looking at yield is clearly not enough but it does provide a good starting point. Why am I so motivated in acquiring international dividend stock picks? Because it provides added diversification and a stronger portfolio which is critical in these very difficult economic times. It will end up making a significant difference in the success of my passive income objectives.

You can take a look at the top 50 from my list here:

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If you are a member of our free mailing list, you know all about our 7-7-7 rule, where we look for stocks that have increased by an average of 7% or better on sales, earnings per share and dividends per share, signalling very high quality dividend stocks. 6 of those 50 stocks actually fill that criteria. If ever you’d like to sign up for our free newsletter take a look at:



Anyway, back to the subject, here are those 6 stocks:)

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Taxes On Net Worth…Tragic Yet Unavoidable?

By: ispeculatornew | Date posted: 09.19.2012 (5:00 am)

We all know how countries from the US to both small and bigger European countries are in serious trouble. They have high unemployment, growing deficits, unfunded pensions and debt that is quickly becoming out of control. I’ve discussed all of this a few times in recent months and what does seem clear is that part of the solution will be for governments to get higher revenues, they are becoming increasingly desperate. Ideally, those would come from increased economic activity but it unfortunately seems like that could take a while. Countries like Portugal, Spain, Italy and even the US might have to take more drastic action.

Current Sources Of Revenues

These days, governments make most of their money through income taxes for both individuals and companies. They also often charge sales taxes, they charge on capital gains, interests and other sources of investment income, etc. One of the big problems though is that as the economy becomes more global, it’s becoming easier for individuals and corporations to avoid paying taxes making raising taxes less effective. Some politicians pretend like simply raising tax rates will fix the problem but I’ve saying over and over that it’s not. The reality is that rich individuals and companies are setting up structures that make it easier to move their income. That is partially why large corporations such as GE, Google and Facebook pay almost no taxes in the US. Many rich individuals, through various methods also avoid paying taxes even though they still end up paying the vast majority of all taxes being paid (over half of Americans end up paying no federal income taxes)

Basically.. It’s NOT Working

Governments seem to be unable to raise revenues and while I like so many others think spending should be cut, I don’t think that raising revenues can be left off the table. It’s not clear what these governments can do. For example, in the US, increasing tax rates that are already much higher than in competing countries seems foolish.

The “Nuclear” Option: Taxes On Net Worth

One option that has been suggested in a few countries including France is taxing the net worth of individuals, especially for those looking to redistribute wealth. For example, if you had a 0.5% tax, an individual that was worth $1,000,000 would be forced to pay $5000 in addition to whatever is owed through income. The major advantage for the government is that it would bring in massive revenues.

A few countries already do this:

France: Progressive rate between 0 and 1.8% of net assets
Iceland: 1.5% on assets above a determined amount
Switzerland: Progressive rate that goes up to 1.5%
Norway: 1.1% on assets above a determined amount

I Feel Like It’s A Terrible Idea

First off, this gives even more incentives for rich individuals and companies to have their assets held abroad, in foreign corporations. It would also be very tempting for the government to increase these taxes over time, making it easier to keep the government’s spending up (not a good thing). Where does it end? This just seems like a recipe for more class warfare, with the 99% trying to tax the rich as much as humanly possible. How could that possibly be a good idea? The top 1% already pays 37% of the taxes? How much more should they pay?

It’s Going To End Up Happening Though

I’m starting to believe that it’s the only way that these countries will be able to come up with a workable tax plan.