Archive for December, 2012

Review Of 2012 – The Good, The Bad And The Unexpected

By: ispeculatornew | Date posted: 12.31.2012 (3:00 am)

Greetings to all of you,

I hope you’re spending terrific holidays. I’m someone who loves to work on specific objectives and the end of year is obviously a great time to go through them, see what has worked and what hasn’t  I certainly know that it’s impossible to always have amazing years investing (unless you’re named Warren Buffett or Bernie Madoff) but I do aspire to get better over the years. I’ve done this exercise every year but this time, I’m doing it in a more public way:) I’ll leave out the personal stuff although those on the mailing list know that it’s been a very good year on that front:)

Investing Review And Objectives

What Went Well:

General Strategy (bucket investing, etc): Over the years, I feel like I’ve become very organized and efficient in this regard, I am in the process of writing an ebook which will certainly expand on that but basically, I feel like I’m being very efficient with less time..!

Passive Income (USDP, etc): I’ve certainly made a ton of progress here. I now have my monthly updates and I do expect my passive income to continue to increase over time. The USDP has performed very well in my opinion, it has more or less matched the S&P500. In a rising market as we witnessed this year, that is an excellent performance.

Tech Stock Long & Short Trading: There wasn’t that much positive out of this part in 2012 but my call on Apple was one. It has not done as well in the last few months but overall, Apple remains a big performer in 2012 and I had selected it as one of my 4 stock picks, at the top of my power rankings, as a stock you’d be crazy not to own and went long on a few occasions.

Facebook: I had been VERY bullish on Facebook and it’s a good thing that I try to avoid buying on IPO’s. Why? The stock crashed.. they are just so unpredictable on and right after an IPO. I finally did buy a while later at $19.99. It’s been a great trade and I’m still a big believer.

Stayed Away From Groupon and RIMM: Both names looked highly unstable to me and I feared trading them on either side. In retrospect, I’m glad I did.

What Did Not Go Well:

Passive Income (USDP, etc): I really should have started using the DRIP and reinvesting on a monthly basis from the very start. It made no sense to wait a year. Better late than never but still.

Tech Stock Long & Short Trading: Wow..after 2 very solid years, 2012 is a year to be forgotten. I honestly did poorly here. AOL was a huge part of my failure and overall I just missed more than what is acceptable. It’s a great thing in years like this that such trading is not the core of my retirement. I also did have some hits and misses in my first Tech Stock Power Rankings which I will go over in the next few days. I will be closing off the final 2 trades this morning but my yearly return stands at a disappointing -6,56%…almost 90% lower than last year

Got Zynga (ZNGA) Way Wrong: I can live with some bad picks and not predicting that AOL would double is something I can easily live with. I should have seen through Zynga though and that turned out to be my worst call.

Stock Picking Competition: Results will be released next week but after being in 2nd spot for most of the year, I took a drop thanks in large part to Apple’s collapse in recent months.

2013 Focus And Objectives:

-Outperform the S&P500 in the USDP
-Reach 15% of my passive income objective (I currently stand at 8.68%)


-Have a minimum 7% return on my long and short stock picks
-Finish in the top 3 of the stock picking competition
-Improve my performance significantly in my 2013 Power Rankings (to be published soon)

Blog Review And Objectives

What Went Well:

Overall interaction: Thanks largely to the mailing lists, I now get several interesting emails from readers almost every single day. I feel incredibly blessed and I’m learning a ton from talking with all of you. Thank you for your continued feedback, it’s very valuable to me.

Content Quality: I do think that I’ve been able to improve the general quality of posting here and hopefully you agree. I did end up cutting one post per week which seems like a good compromise. Better focus on quality than quantity right?:)

What Did Not Go Well:

The overall traffic was barely up this year. A few reasons can explain this. First, IntelligentSpeculator got hit by a Google update and saw much less traffic from search engines. We reached over 130,000 unique visitors this year, still fairly good right?:)

2013 Focus And Objectives:

Content: I do feel like I can still produce higher quality content and will work on doing just that. I do want you to make me accountable if you don’t feel like some of the stuff lives up to expectations,

Reach: In the coming year, I want to continue publishing on the blog and the mailing lists but also be more active on Twitter, on our Facebook page, write directly on third party sites such as SeekingAlpha! It should be a great year!

Traffic: The objective is fairly ambitious, I want to double the 2012 numbers..!!

Social Media: I want to make Facebook, Twitter and other social networks a much bigger part of IntelligentSpeculator

eBook: I do expect to release my first ebook, at some point in the first quarter, it will be offered for free to all readers so stay tuned!

Overall Thoughts

Certainly, I’m being ambitious about the coming year but I feel like there is a lot of momentum following a great 2012 year, I truly appreciate writing on this blog:) Thanks again for everything and best wishes for 2013 to all of you!:)

Weekend Readings

By: ispeculatornew | Date posted: 12.28.2012 (4:00 am)

I guess this is the last rambling edition for the year, with a lot of very interesting stuff coming in the next few weeks:) Week #17 of the NFL sounds like the perfect way to end the year doesn’t it?:)

General Readings

10 reasons why houses are better investments than shares @Monevator
What it feels like to be rich @ JamesAltucher
Financial apocalypse? What would be truly valuable? @  CashMoneyLife
A younger approach to retirement @ 20sMoney

Dividend Readings

Do you have a plan? @ DividendNinja
Best of the dividend guy blog @ TheDividendGuyBlog
Dividend investing goals @ DividendGrowthInvestor

Tech Stock Readings

Potentially great news for Netflix (NFLX) @ MarketingPilgrim
Amazon, Google on collision course for 2013 @ Reuters
Next step for Quora @ Techcrunch

Risks Of Dealing In Emerging Markets

By: ispeculatornew | Date posted: 12.27.2012 (4:00 am)

It’s always interesting to see how different rules and common business practices are between here and emerging countries. One major reason why I usually stay away from picking single stocks in emerging countries is that it’s very difficult for me to compare these companies. Why? When rules are different, it changes everything. Take financial statements as an example:

I personally like to look at many financial ratios such as the P/E ratio but when earnings are calculated in very different ways based on different rules, it makes it nearly impossible to compare them together.

Even North American/European Companies Are At Risk

Doing business in emerging countries has a lot of benefits (opportunities, high growth, less competition, etc) but it also carries risks that we can sometimes forget.

Last April, when the government of Argentina announced that it was taking control of a gas company that was owned by Spain’s Repsol YPF SA, it was a huge surprise for the Spanish company. Why did the Argentina government take such a decision? I guess part of it is because they can make the laws in their own country. They also face a lot of domestic issues and in all honesty, some governments around the world think they have the right to take such actions. I can’t imagine something like this happening in the US but in some other countries, it’s just another option for a government that is struggling financially. It’s kind of ironic that this happened to a Spanish government. As if things were not going badly enough for Spain.

Diversification Is King

I think it’s important to keep such issues in mind when dealing with companies that are either based in emerging markets or that have a lot of business there (many energy companies operate in such markets as well). For dividend investing, that can mean not having too much of your money in one specific company or that operates in one emerging market.

ETF’s are also a good alternative that make it easier to get great diversification not only among companies but also markets.

Merry Christmas To All Of You

By: ispeculatornew | Date posted: 12.25.2012 (4:00 am)

On behalf of my family, my business partner and I, best wishes for this Christmas, I hope you’ll be able to spend the day with your loved ones, share some good memories, and have a thought for those that are unable for one reason or another to do exactly that.. I know that I feel very fortunate for everything that I have including all of you who come here to read, comment, email me, etc.

Thank you for everything, best wishes to all of you,

IS

Shorting A Stock Done Right

By: ispeculatornew | Date posted: 12.24.2012 (3:00 am)

I know that many of you prefer safer investments and I certainly have my fair share of ETF indexed and dividend stocks. Another portion of my portfolio though is dedicated to more risky trading, mostly through my long & short tech stocks as well as my speculative longer term picks. For that reason, I’m always interested in how some of the bigger investors in the world take positions. Last year, I had mentioned how impressive Carson Block of Muddy Waters had been. He did not hit on every hit but there were a few where after extensive research, he found what he considered to be almost fraudulent companies. He would then write up a report, short the stock and sell that report to a few managers. Once that was done, he would release the research to the public, sending the stock tanking. Sino-Forest (TRE) in Canada was one of his best shots as the stock started off over $20 and is now worth nothing, and was delisted from the Toronto stock exchange.

You can take a look at some of the research produced by Sino-Forest here.

While Muddy Waters focuses on shorting stocks, other very successful investors do both buying and shorting. One of those is Bill Ackman, CEO of Pershing Square Capital management (seen on the right). Last week, he decided to explain exactly why he is going short on Herbalife Nutrition Club (HLF), what he described as an MLM scheme.

You can read his presentation here

He even got the domain FactsAboutHerbaLife.com and made a very compelling case about why the company wasn’t worth anywhere near its current valuation. The market seems to agree:

-I love the guts of Ackman, putting himself out there, with a bold call. It’ll be interesting to see how it turns out but clearly, putting all of this in the public eye will accelerate the conclusion.

Any thoughts on short sellers like Block and Ackman? I personally do think they make the market more efficient but I’d love to hear your thoughts….

 

 

Weekend Readings – Fiscal Cliff Looming?

By: ispeculatornew | Date posted: 12.21.2012 (4:55 am)

A few days before Christmas, I don’t think I’ve ever had less shopping left.. it certainly feels good to be a bit in advance, hopefully it’s the same for you:) I’m certainly looking forward to taking a few days off… I wish almost everyone the same.. those trying to get a fiscal cliff need to keep working, it’s a bit depressing that Boehner could not even pass his own plan through last night.. if he can’t get Republicans on his side, how in the world could Democrats work out a deal with the GOP?…

General Readings

Going off the fiscal cliff a good thing? @ DarwinsMoney
HFT: Speed isn’t the problem @  Pointsandfigures
Fiscal cliff infographic @ ZeroHedge

Dividend Readings

Income focus: COP and PSX @ DividendMonk
Emera EMA Dividend Stock Analysis @ TheDividendGuyBlog
Abbott labarotories: Quality dividend aristocrat @ DividendGrowthInvestor

Tech Stock Readings

Lessons learned from Facebook’s Instagram fiasco @ TechCrunch
RIM reports smaller loss than expected @ TechCrunch
A brief rant against the people ranting against Instagram @ Atlantic

Could Apple ($AAPL) And Google ($GOOG) Finally Become Smart About Their Rivalry?

By: ispeculatornew | Date posted: 12.20.2012 (3:00 am)

AAPL

Apple and Google have been rivals for many years now and while they did have some common projects together, we’d hear much more about the critical areas where they compete.

They compete in many areas such as tablets where the iPad competes with several Google Nexus and Android-powered devices. Then in the mobile space, there had been rumors that Apple had considered switching its default search engine to Microsoft’s Bing. Of course, the #1 area where they compete is mobile where Apple and Google Android powered phones have been able to become dominant players. Apple has been going after a few of the smartphone makers legally such as Motorola, Samsung, etc. and while they have not won everything, they did land a few big wins. They have yet to go after Google directly though.

They have also been outbidding themselves in recent patent sales in order to launch more lawsuits, etc.

Then recently, with the launch of the iPhone5 came the maps fiasco where Apple was basically unable to secure renewal rights and had to replace Google maps with its own offering in what is now clearly a big mistake as the product was clearly not ready. It’s hard to blame Google on this but it was well played. Why? Because in the end, Google launching its own iOs map was a huge success with over 10 million downloads in the first few days (including yours truly).

Are They Playing This The Right Way?

I’m not convinced that Google and Apple are playing this the right way. They currently dominate an exploding market, have been able to basically eliminate Research in Motion, fend off attacks from Microsoft, Amazon and others, etc. But if they keep waging war against each other, spending billions in lawsuits, and trying every possible tactic to destroy each other.

There’s A Better Way

Why wouldn’t they choose to collaborate to some degree, to make sure that they keep control of this market, etc? It seems like that would make a lot more sense, especially in a fast growing market. They would achieve much more by keeping similar market shares in a fast growing market than by risking the arrival of a major competitor. Don’t you think?

First Signs

When Kodak announced it was going to sell a significant patent portfolio, it was hoping to have giants such as Microsoft, Apple and Google engage into a bidding war that would have generated a ton of money. Instead, Apple and Google agreed to join forces and present a joint bid. Incredibly smart move and it looks like they will save several hundred millions because of it.

I personally think they need each other because no government would let only one of them take control of the mobile space. So while they can’t “officially be working together to eliminate competition”, I certainly think they should collaborate a lot more than what they are currently doing.

What are your thoughts?

Disclaimer: Long Apple ($AAPL)

Ultimate Sustainable Dividend Portfolio – December 2012 Update – Obama Tax Hike?

By: ispeculatornew | Date posted: 12.19.2012 (3:00 am)

In 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 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. you can see my most recent update here

The USDP continues to do very well!! 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 “473” not found /]

Dividends Received

Thanks in part to a special dividend (more on that later), December income will end up being at least double what it was a year ago. 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

I had mentioned that I would not buy a stock simply based on a special dividend. That being said, I would be happy if an exiting stock took that decision which is exactly what TROW did, announcing a special $1.00 dividend in addition to its $0.34 quarterly dividend.  More to come? It’s certainly possible with a few days left and big dividend tax hikes still very much in the picture.

[table “472” not found /]

Returns

I’m fairly happy with the USDP return in the past year. Why? Because both are more or less equal which in a fairly fast rising market is a good performance for a dividend/income focused portfolio.

 

Trades

Starting in January, I will be trading almost every month since I will be reinvesting $500 into the portfolio every month.

Passive Income Targets – December 2012

By: ispeculatornew | Date posted: 12.18.2012 (4:00 am)

After starting this new series earlier this year, I received a lot of positive feedback. Going forward, on a monthly basis. 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 but also be able be diversified enough to be ok no matter what happens. 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. I also want to gradually make sure that my income producing assets are not all locked away in accounts that will only be available upon retirement. 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. A few people tried to figure out how much capital I have by looking at the USDP size. The main issue is that the USDP is only part of my dividend income. I also get income from my ETF holdings, etc.

December Updates

I did find out my bonus number which will help me make a certain jump both in my assets (and thus dividend income) but also help me taken down my mortgage and thus get me closer to the day where I’ll be able to reinvest a bit more out of every paycheck:) Other than that, not much new to report, I continue to do research on how to further diversify and improve my cash flows:)

How Much Do I Really Need?

I am aiming for an income of 100K or so, before taxes. To be clear, I feel like I need significantly less than that. Why? I’ve described how I am living off of significantly less right now (I’m paying taxes, paying my house, saving, etc). I also have the option, as discussed of retiring in a foreign location.

Overall, I feel like aiming for the same level of income as I am currently making is very very reasonable and I could easily live with less but why aim lower if I’m confident I can reach that 100K?:)

 

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:

3.76% – 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 (a month from now). 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). I saw a slight increase here thanks to markets rising and a similar yield.

4.92% – 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 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. We have seen a lot of volatility lately in income sources as you might have read on TheFinancialBlogger but the debt repayment continues.

Total: 8.68%

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%:) I do expect a significant jump in January after the bonus payments.

 

Passive Income Ideas

0% – Real Estate: I have started writing about adding real estate to my income flows. One aspect that I love about Real Estate Investing is how much of an inflation hedge it will represent for my portfolio. So I started looking into some aspects such as investing into residential or commercial real estate.

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 projects 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!

Apple ($AAPL) Getting Absolutely Killed..Now What?

By: ispeculatornew | Date posted: 12.17.2012 (4:00 am)

It’s no secret, I’ve been a huge believer in Apple, both the company and its stock. As you can imagine the stock getting crushed has not been good for me. Not only am I long the stock but it was also one of my 4 stock picks in the yearly stock picking competition. As you can imagine, my performance has declined. Just take a look at this chart:

Brutal, brutal, brutal….

Let’s Not Lose The Context

It becomes so easy with the information overload to think that Apple is in big trouble, crashing quickly, etc. Let’s look at a longer term chart

Suddenly, it doesn’t look as bad does it? Just last week, Apple declined after UBS downgraded Apple, changing its price target to $700 (from $780). More is expected today after a downgrade by Citi during the weekend. That’s still pretty darn high isn’t it? It would be a return of over 25% in the next year.

Is Apple Still A Bargain?

Let’s take a look at some numbers:

[table “471” not found /]

So basically, Apple is trading at a P/E of 10.7, forward P/E of 9.1, has returned 32% this year… sales are growing at nearly 50%.. it doesn’t seem as dramatic right? So why is everyone selling? Fears that the iPhone5 and iPad minis are not selling as well as they had hoped seem overblown, Honestly, Apple still has dominant products, has an Apple TV in the pipeline, continues to dominate in the sales of digital products such as music and apps.

To give you an idea, that is almost exactly Microsoft’s (MSFT) P/E ratio..except that Microsoft is growing 8 to 9 times more slowly…

So really, I continue to believe in Apple’s growth story, and its in stock.. how about you?

Disclaimer: Long Apple (AAPL)