Archive for October, 2012

International Dividend Stocks – Maritime Transport, Risk Or Opportunity?

By: ispeculatornew | Date posted: 10.17.2012 (4:00 am)

Every month, I start looking and researching dividend stocks of international companies. Why? Because they add diversification which I personally always look at as being:

“higher expected returns for the same level of risk”

I always like to consider such stocks when I update the ultimate sustainable dividend portfolio in an attempt to reach my long term passive income objectives. Last month, I had been looking in detail at 6 high quality foreign stocks. This month, I was looking for something more specific. Knowing that various parts of Europe are in big trouble, I was looking for possible opportunities that could be created by such chaos. Think about it for a few minutes, which country has been in the biggest trouble in the past few months? Greece comes to mind. There is no doubt that Greek companies are operating in extreme circumstances and many companies will likely go bankrupt. That being said, others will survive, especially once the situation has less uncertainty.

So today, I started looking at sectors where Greek companies have decent market share. More specifically, my criteria was:

-US traded stocks (excluding pink/otc stocks)
-Foreign based companies
-Paying over 5% dividend yield

I ended up running into the maritime transport sector which seems to have many of the biggest US listed companies headquartered in Greece.. just take a look at this:

[table “459” not found /]

Clearly, several of these companies have been doing very poorly but in terms of speculation and trying to find survivors in an industry where better times are ahead, there is potential. The survivors will clearly face less competition going forward.

Obviously, much more analysis is required here but the high dividend yields certainly warrant a better look, especially for someone looking into building a more aggressive dividend portfolio.

Adding Real Estate To My Passive Income Flows

By: ispeculatornew | Date posted: 10.16.2012 (4:00 am)

Over the past few months, I’ve discussed my passive income objectives and it’s no secret that having solid investment accounts are a huge part of my strategy. I’ve been updating my dividend investing in my Ultimate Sustainable Dividend Portfolio updates and have also linked to some information regarding ETF investing. Those are the core of my long term investment income strategy. I do however also plan to accumulate passive income from other areas and real estate seems like an obvious place to look into. I’m hoping a John D Wood letting agent in Clapham can help me find some investment properties. I did want to take a better look into the different methods that could be used as well as the pros and cons. I do not have that much experience so I’d certainly love to hear your thoughts:

Buying REIT’s

What is a REIT? Basically, it’s a stock of a company that buys and then manages real estate investments.

Pros:

Very little work required, you could argue that this would be included in a dividend portfolio but I do consider real estate to be in a class of its own
Very diversified: buying a REIT means getting exposure to real estate in many different buildings, regions and countries in some cases
Requires very little capital and little to no leverage
Very liquid (you can get in and out within a moment’s notice)

Cons:

Fees: There are a lot of additional fees involved when you hold a REIT as the company has staff, legal fees, etc.
No control over the investment: Basically, when you buy a REIT, you are buying based on the historical returns for the most part because trying to know what they hold, how well their investments should do, etc becomes very tricky.

My partner and I do have a site dedicated to Canadian REIT’s with a free ebook that you might want to check out

Buying Physical Real Estate On My Own

Another option is one that many tend to go for. They simply go ahead, buy a house, condo or another type of real estate property in an attempt to rent it out and perhaps sell it at some point. Many ended up getting burned, especially in the US in the past few years as prices crashed. I would personally only go ahead by incorporating myself in order to simplify taxes, accounting, etc.

Pros:

No overhead
Would be incredibly interesting

Cons:

Would have a TON to learn
-I’m not very good with repairing stuff and lack the time so would likely need to hire someone to help
No diversification as I could only afford 1-2 properties that would likely be near where I live
Leverage would be necessary

Buying Physical Real Estate With Partner (s)

This is clearly an interesting option for me as I’ve had a lot of success partnering up with Mike for my online venture.

Pros:

-You can share risk, knowledge, experience and complement each other
-Get more perspective and critical thinking when making those investment decisions

Cons:

Finding the right partner is incredibly difficult and things can go terribly wrong if you don’t have the right one, it can lead to a messy “business divorce”
Need to setup a legal entity (it becomes way too messy if not)

Clearly, I’m fortunate to already have the best partner and the next logical step would be to start buying some real estate. We’ve written about how buying websites is like buying real estate but with more attractive pricing. That is still true although the difference has been diminishing over time. We also both like the idea of adding different sources of passive income to protect ourselves against changes on the web, etc. It just seems like a logical next step.

The Best Option?

Obviously, every person would have a different way of getting exposure to real estate and I don’t think there is one wrong answer. Personally, there is no doubt that moving to the 3rd option makes the most sense to me and it will certainly be a lengthy (but hopefully very interesting!!) process!

What Is Next

From my partner and I’s perspective, we are in a debt repayment mode right now so that will be the first condition to be met. We will be working on:

-Establishing a new capital structure
-Getting better info about the process
-Getting a better feel for the markets, pricing, etc. This critical given how prices have moved in recent months
-Building an action plan

Are any of you active in the real estate or REIT market? I’d love to hear more about it!

Mr Obama, Just Stop Taxing Dividends…(or keep them as low as you possibly can)

By: ispeculatornew | Date posted: 10.15.2012 (4:00 am)

It’s frustrating. I’ve been writing about this over and over but still get questions about why dividends should NOT be taxes the same way as income. The main argument here is that dividends have already been taxed once.

A Personal Example

Let’s go back to the most simple case. A friend of mine started his business 3-4 years ago and has been doing very well with it. As is the case with most business owners, he has a lot of expenses that could be considered personal or business. In theory, a car that is used mostly for personal use should NOT be paid by the business….

But let’s take a look at his 2 options:

-either he buys the company with his company which will cost $40,000 for example.

if he wants to buy it personally, he will end up paying corporate taxes on the profits. Once that is done, he will pay himself a dividend and have to pay MORE taxes on that amount. Basically, he’s paying taxes twice on that $40,000.  That seems a bit unfair doesn’t it?

The same applies to listed stocks that we buy and receive dividends on. That income HAS ALREADY BEEN TAXED. The government should not be taking money over and over on the same income

It’s Coming Though

Obama seems determined to let the Bush tax cuts expire (including those on dividends). It’s happening all around the world in fact as governments become more desperate for revenues.  Just a few days ago, the new left wing government in Quebec announced it would be increasing taxes on dividends. Many publicly disagreed and it’s not clear if they’ll go ahead with it but one major problem is that a majority of people do not understand the impacts of such an increase because they receive little to no such income.

What are your thoughts?

Weekend Readings

By: ispeculatornew | Date posted: 10.12.2012 (4:00 am)

I truly enjoyed watching the Ryan-Debate yesterday, did any of you get a chance to take a look? What were your thoughts? It was a solid debate, much closer than the first one without a doubt! Before getting started, I’d love to point out a new book published by Mike Piper, a friend of this blog. It’s all about Social Security and I highly recommend that you check it out (it is offered for free on Kindle for a little while longer). Here are a few readings you might want to look into this weekend:)

General Readings

12 stocks for 10 years – October update @ CuriousCat
How the CFA helped me get my dream job @ SmartFinancialAnalyst
3 investment methods off the beaten track @ DarwinsMoney
The real unemployment rate @ AllFinancialMatters
Housing recovery in perspective @ TheBigPicture

Dividend Readings

Clorox (CLX) dividend stock analysis @ TheDividendGuyBlog
Overview of the Canadian dividend space @ DividendStockAnalysis

Tech Readings

Viral video: Carol talks Marissa @ AllThingsD
Why Zynga failed @ TechCrunch
One year later: Apple’s tribute to Steve Jobs @ ReformedBroker

Which Of These Could Rebound? ($RIMM, $GRPN, $ZNGA)

By: ispeculatornew | Date posted: 10.11.2012 (5:00 am)

Three of the bigger “losers” in the tech space have suffered monumental losses for their shareholders in recent months, think any of these 3 have a comeback in them?

Groupon (GRPN)

I’ve been very negative about Groupon for some time now, dating back to before the IPO in fact. There were many warning signs such as the massive selling by insiders, the accounting practices being questioned by the SEC and forcing filings to be restated, etc. Even more worrying is the fact that so many competitors jumped in to compete with Groupon. There has been LivingSocial (backed by mighty Amazon), Google, Facebook, Travelzoo, to thousands of smaller more local players. Even yesterday, eBay announced it will be starting to offer local deals. The problem of course is that it’s incredibly easy for someone to start offering local deals and so much competition has led to:

-lesser quality offers
-much smaller margins

Things do not look like they’ll turnaround anytime soon… take a look at this chart:

Research in Motion (RIMM)

A few years ago (seems like decades ago but it’s not that long), Smartphones = RIMM. Man have things changed. The company’s phone quickly fell behind rivals mostly because of software. Its operating system is far behind alternatives from Apple and Google Android phones which has also resulted in lesser quality apps which seem to have been the fatal blow. The company has been late and bad at product launches with its Playbook tablet being a great example. Can the company turn things around? Possible although now that it is publicly for sale, I’m not sure what a great scenario is for RIMM. There is no doubt that it’s a difficult one to value but depending on when it sells all or part of itself, there could be an interesting opportunity.

Could it ever get back anywhere near it highs? Unlikely

Zynga (ZNGA)

Wow, Zynga has been a huge disappointment for me. It was near the top of my 2012 Tech Stock Power Rankings and has clearly hurt me quite a bit. What happened? Many things I guess but the main one is that I do agree that Zynga is now run as a business similar to a movie studio that depends on launching new hits constantly. Unfortunately, because of difficult conditions and more competition from established players, that has not happened. Rising costs and basically no growth in revenues has led the company to flatline. In the tech world, that is a recipe for disaster. As you can imagine, the stock has not moved favorably. The company is still profitable and expects to remain so next year so there is clearly the potential for a turnaround. I’m not exactly sure what would be needed for that to happen though. Just look at this chart from the IPO till now… I sure am happy I wasn’t an early investor or current employee of Zynga

So there you have it, 3 stocks that have been performing very very poorly in the past few months. Which one is most likely to jump back? In order, I would say:

-Zynga
-Groupon
-Research in Motion

It’s a tough call though, I’d love to get your thoughts….

Ultimate Sustainable Dividend Portfolio – October 2012 Update – 77% Income Increase Y/Y

By: ispeculatornew | Date posted: 10.10.2012 (5:00 am)

In September 2011 year, 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 but also show how I would manage such a portfolio. I have said it before, I do not believe in stocks that you can hold “forever”. Thus, even in a long term portfolio such as this one, I will end up making some trades from time to time.

The USDP is obviously a critical part of my now very public quest to replace my job income with passive income.

The USDP is now one year old!! Very exciting stuff and I’m thrilled with how things have gone so far. I have done a couple of trades and continue to work on optimizing it, 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 20 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:

[table “458” not found /]

Dividends Received

The Month of October is turning out to be great!! Last year, when the USDP started, October was the first full month so this one was my first opportunity to see how much it had increased in one year. In short, the income has increased 77%!!! Hopefully it will keep up!:) It will hopefully increase as the companies increase their payouts and as my positions increase thanks to my use of the DRIP.  Take a look at the progress:

 

Ultimate Sustainable Dividend Portfolio News

The past month has been fairly quiet although 2 stocks did end up raising dividends, see the details here:

[table “457” not found /]

Returns

This month, the USDP slightly underperformed with Intel Corp (INTC) being the weakest performer..hopefully it can turn things around soon but the main metric, the dividends, have continued to increase!

 

Trades

Well we did a trade last month when I added Baxter international (BAX), you can read about it here, there will not be more trading for now. However, tonight I will be investing a bit of our cash into the under weighted stocks such as Johnson Controls Inc (JCI).

This Chart Should Terrify You

By: ispeculatornew | Date posted: 10.09.2012 (5:00 am)

It’s a chart that you’ve probably seen so many times and as we get exposed to it, there’s a temptation to downplay the gravity or the effect. The fact is that the US debt levels are already very high, have been rising at a record pace in the past few years with no end in sight. In fact, no matter which candidate ends up being elected in November, they don’t even hope or pretend like that number is coming down anytime soon. It’d be difficult to say other wise.

US Public Debt as % of GDP Chart

US Public Debt as % of GDP data by YCharts

Why It’s Only Getting Worse

We have a slow economy and millions of unemployed that are resulting in less revenues for the government and the population. On the other side, holding expenses in control is proving to be a big challenge because exploding health care expenses among so many other things. It’s not looking very good, that’s for sure.

We’re Not So Far From Europe

We keep looking at what’s going on in Europe as if it could never happen to us but the reality is that we’re much closer than you might think. In fact, if you think about it, the US public debt as a % of GDP is 102.94… just think of a few troubled nations in Europe and let’s see where they are:

-Greece 160.81%
-Italy 120.11%
-Portugal 106.79%
-Ireland 104.95%
-US 102.94%
-Iceland 99.19%
-France 86.26%

Is it me or is the US not that far off?

How It Impacts Every One Of Us

In a scenario where debt continues to increase, there will always be a risk for both inflation and rising rates. Those are 2 fairly scary scenarios.

What It Means

More than ever, it’s important for all of us to manage our finances and investments efficiently. We simply cannot depend on the government, our employer, etc.

What are your thoughts on the crippling debt numbers? Are you worried at all?

Think Unemployment Numbers Are Manipulated By Obama? Seriously?

By: ispeculatornew | Date posted: 10.08.2012 (4:00 am)

Gotta be kidding me. I’m willing to say a lot of things about Obama. Yes, he has made a lot of mistakes, his idea of big government is far from efficient and probably not what most of us want to see running Washington. That being said, I always have a hard time getting some arguments from the right. There are so many things that we can attack Obama with. Just look at how well Mitt Romney did in the debates. There is NO NEED to start running these conspiracy theories.

Every time I hear something along the lines of Obama’s birth certificate or how he does not like America, it drives me insane. The latest one occurred last Friday after the release of the latest unemployment numbers with the unemployment rate dropping below 8% for the first time in years to the surprise of…everyone. Here is one of the more talked about tweets:

Why Go There?

I personally think that those bringing up these bogus arguments lose a lot of credibility. Many republicans have explained how it was basically impossible to manipulate these numbers. I didn’t say improbable.. I said IMPOSSIBLE.  I’m not saying that it’s not weird, or that democrats might have pulled in every stop to get jobs created as we near the election. There’s nothing surprising about that. Every government in every country does that. But there’s a big difference between that and pretending there is this big conspiracy theory. Yes, Obama is very fortunate numbers went his way. But it’s just one number while many other things have not gone his way.

Romney seemed to handle it right as did many others saying that it was very good news but that this happened too late and we are far from where we should be at this point. Is that so difficult to say? Does someone really believe that Obama does not love his country? I mean come on!!! Obama has done himself enough harm, Romney stepped up his game in the debates.. do Republicans really have to go for these gimmicks?

Thoughts?

 

 

 

Weekend Readings

By: ispeculatornew | Date posted: 10.05.2012 (5:00 am)

Did most of you get to watch the debate? It was very entertaining, I was very impressed with Romney overall, solid performance, it will hopefully give us a very interesting race:) Anyway, here are some good readings for the weekend:)

General Readings

How does a currency drop 60% in 8 days? @ TheAtlantic
Broke athletes… sad reality @ ESPN
Political aspects of the fiscal cliff @ TheReformedBroker

Dividend Readings

Best brokers @ TheDividendGuyBlog
Beware of stock buybacks @ WSJ

Tech Readings

-Pandora Letter @ TheBigPicture
What makes Apple’s maps so good? @ NYT
Facebook (FB) launches gifts @ TechCrunch

Trulia ($TRLA) vs Zillow ($Z)

By: ispeculatornew | Date posted: 10.04.2012 (5:00 am)

You might have missed it but web stock Trulia (TRLA) turned public last month at a price of $17.00 and without any surprise, I’m adding it to the stocks that I follow. One of the things I love about Trulia is that its main competitor, Zillow ($Z) is also a stock that I follow and trade. It will hopefully provide me with good trading opportunities in the same way as Monster Worldwide (MWW) vs Dice Holdings (DHX) or some of the travel web companies (KYAK, PCLN, EXPE, TRIP, TZOO, etc). Both companies are very similar in the services they offer, how they make money, etc. Zillow is the bigger of the two and clearly the leader but I can see why some think that TRLA might be a good bet.

Here is a look at their main websites:

Zillow.com

Trulia.com

You can also see web traffic data for both:

Zillow Web Traffic

Trulia Web Traffic

And here are the main numbers:

[table “456” not found /]

So Zillow is currently worth about 2.44 times as much as Trulia. Is there already an opportunity? I thought it would be interesting to look even though I doubt I’ll be trading Trulia right away after being burned on recently turned public TripAdvisor (TRIP) earlier this year. Zillow made what is almost certainly a smart move as it did a secondary offering of its stock a week before Trulia’ IPO in order to get cash at decent pricing before its competitor entered the market.

Interesting Stat: Insider Holdings

Zillow: 9.53%
Trulia 25.77%

I don’t usually pay much attention to this stat mainly because there are so many ways for insiders to move around it. I also assume that most of Trulia’s insiders are still locked in given the fact that the company just turned public. So not a big deal but still worth noting.

Main Financials

Revenues

Earnings Per Share

Clearly, the revenues difference is not as big we might imagine but in terms of earnings, Zillow is profitable while Trulia remains far from that point up to now.

Questions Surrounding Zillow (Z)?

A few days ago, Andrew Left of Citron Research wrote a very negative report about Zillow that you can read here, it is worth the read. That and lower overall market sent the stock down 7%. Add to that a report that the company is being questioned by the SEC regarding its filings and you can see that there are at least some clouds on the horizon. A very valid point that I saw raised by Ang Nguyen was the fact that Zillow’s growth was limited since it already has so many houses and agents already using its services. How much more can it do? I often see that argument raised in the case of Facebook which I completely disagree with. I’m unable to go as far about Zillow and Trulia because I don’t know enough but I certainly do agree that possibilities are more limited. That being said, real estate is a HUGE industry so there are clearly many other things they could do in the future.

Do Valuations Make Sense?

When I look at Zillow current earnings and estimates for this year ($0.31 per share) or even next year ($0.64), the stock does look very expensive, especially in the light of the Citron Research paper. It’s also the case for Trulia which has a more question road to go to reach profitability.So I would not consider buying either of these as long term speculative buys. Trading them as part of my long & short tech stock picks though would certainly make a lot more sense.

What are your thoughts on Zillow and Trulia?

Disclaimer: No position on either name