Archive for June, 2013

Weekend Readings – What’s Going On In Wimbledon?

By: ispeculatornew | Date posted: 06.28.2013 (3:00 am)

The Championships - Wimbledon 2012: Day ThirteenI am a big tennis fan and Wimbledon is clearly a unique event in so many ways. I know a few of you have been watching.. I still can’t believe all of those early losses.. Federer, Nadal and so many others… it’s been a memorable first week! Now hoping to see a Murray-Djokovic final… and maybe a couple more wins for Eugenie Bouchard?:)

General Readings

Why is it so hard to hire great people? @ TheAtlantic
Insiders are buying and that’s good news @ Marketwatch
Why aren’t the top journalists rich? @ Priceonomics
Investors running out of the bond market @ NYT

Dividend Readings

Stocks beyond numbers – 5 golden rules @ TheDividendGuyBlog
Waste management unappealing for 2013 @ DividendMonk

Tech Stock Readings

Is Mark Zuckerberg the new Bill Gates? @ PandoDaily

If Your Long Term Retirement Account Isn’t Extremely Boring….

By: ispeculatornew | Date posted: 06.27.2013 (3:00 am)

boringThe other day I met a girl who was discussing how she was so excited to be buying Apple and wanted to get involved in Facebook . As you probably know, I’m more than sold on both stocks and would happily buy Apple or Facebook (if it were public). She then proceeded to explain to me that she had 3-4K saved for retirement and investing into those 2 companies would be so “exciting”, it was going to feel as if she were part of these 2 incredible success stories. That is when I had to take a step back.

I Love Excitement/Adrenaline As Much As The Next Guy

I mean look at my trades, I’ve discussed volatile stocks such as Facebook (FB), trade long and short tech strategies. I also discuss some longer term speculative picks in the tech newsletter. Outside of trading there are also a ton of different and exciting things that I like to do. I do however have a great distinction between the different types of trading. I am willing to risk much more on money that I can afford to lose. For those trading accounts, I am willing to take risks if the expected payout is good enough.

For my retirement account, I don’t see the point of trying to make things overly exciting. My goal is simply to have progress over the years, powered mostly by money I can set aside every month, but also a clear and consistent trading strategy.

You Have To Ask Yourself: “What Is My Objective?”

When trying to prepare your retirement money, what are you trying to do exactly? Hit a homerun? Then maybe you could add some penny stocks, wager some money on sports or in a casino even. Personally, as much as I like trading, I have a very clearly defined strategy for my retirement account, one that I know will work well over the long term even though there is absolutely no chance that I will hit a homerun a triple my money over a few weeks or even a few months. Why? Because it’s very clear to me.

Honestly, do you care if your retirement account is extremely boring to track? I don’t.

Possible Winning Strategies For Long Term Retirement Accounts

There are many different things that can be done. You can build a diversified ETF portfolio that gives you exposure to the main asset classes while also offering incredible diversification, all for a very reasonable price. Another strategy that has been discussed quite a bit is dividend investing, which will build you a steady and growing flow of passive income. I’ve also seen some very successful investors do a combination of both of those in order to gain exposure to different types of assets while also counting on steady dividends.

How “boring” is your retirement account?

Stop Waiting For The End Of The World…

By: ispeculatornew | Date posted: 06.26.2013 (3:00 am)

In my quest to become financially independent, I try to prepare myself for all scenarios. I’ve certainly discussed my concerns about the economy, government deficits and the fact that depending on the government or any other type of pension is foolish. I do my best to prepare myself for such scenarios but there is a big difference between having a portfolio that can sustain or do well in difficult times and trying to “predict the end of the world”.

Yesterday, I was discussing with a friend of mine who is shopping for real estate. He is very concerned about real estate prices in Canada and who would blame him?

housing-market-US-vs-CAN

He’s thinking about waiting a few years for some kind of decline. It’s not a terrible idea and in fact I remember thinking about doing the same thing before buying my house 3 years ago. I ended up deciding not to because it’s so difficult to type the market (no matter what market you’re investing in). Looking back, it’s a good thing that I did not wait. My family and I would still be on the sidelines. That crash has yet to come. It could take a few months, a few years or maybe a while longer. It’s almost impossible to bet or invest based on such scenarios.

Enter Gold Bugs

I’m not a huge fan of gold. I’ve written about it a few times but don’t currently own any. At some point, I will probably buy some but I don’t expect it to be a significant part of my holdings at any point. Others have gone all-in on gold as they prepared for massive inflation and a stock market collapse. It’s not impossible that we will witness such an event. And for a while that trade was profitable… But lately? They say a picture is worth a thousand words, so take a look at this chart from the Reformed Broker:

gld-spy

Ouch! Needless to say that it has not worked out very well. My main takeaway would be that it’s never a good idea to invest a big portion of your assets in an unlikely scenario. I can’t imagine that someone would believe, no matter how negative they are, that the end of the world is a year or two away. So much can happen. Taking part of my savings and investing into such a scenario is something I might consider at some point. But not until I had a lot more to invest in.

The Alternative Approach

Instead of trying to move my entire assets to protect myself from a difficult environment, I try to use strategies that will do well in any environment. It’s not a perfect method (because such a thing does not exist) but using strategies such as buying a sustainable and diversified portfolio limit the downside in case of a financial collapse. It’s not perfect but I’d argue that very few of us can afford to always be ready for such an event.

Do you feel like your investments provide protection from the worst case scenarios? If not, do you mind?

The Risk-Reward Ratio On Apple Makes It A No-Brainer

By: ispeculatornew | Date posted: 06.25.2013 (3:00 am)

I don’t need to convince you that saying that I like Apple’s stock is not a very popular view these days. It used to be unanimous and for years Apple would still beat expectations quarter after quarter, both on its top and bottom lines. That has obviously changed, and owning or believing in Apple is the type of thing that you almost feel like keeping to yourself.

My Case For Apple

I always talk about the risk vs reward paradigm, and I certainly feel like that is the main case for buying Apple. First off, a few important facts about Apple.

-Trades at a P/E of 10.22: To give you an idea, that is cheaper than companies like

Intel Corp 12.69
Microsoft – 13.06
IBM 13.19
Cisco 15.32

When I look at recent growth in revenues and earnings, I don’t see something that would justify such a valuation:

ycharts

What Would Justify Apples Current Valuation?

The main thing that would justify such a P/E, in my opinion, would be for Apple to have more downside potential. I don’t see that happening anytime soon. To me, those companies are good examples of what Apple could end up being in a worst case scenario. The main concerns for Apple shareholders such as myself are:

No New Products: One of the big concerns for shareholders has been the lack of new products. Ever since Steve Jobs left the company, Apple has been living off of its main products (iPhone, iPad, iPod, Macbook, etc) with little to no innovation. There have been rumors that products such as the iTV and the iWatch will soon launch, but those have been going on for a long time now with no results.

Decreasing Margins:There have been rumors of a cheaper iPhone coming to the market and there is a debate over the benefits and downsides of such an approach. It’s unclear how good of a move this would be, but I don’t think anyone expects margins on existing products to improve. The fact is that competing products are getting better and Apple can no longer get away with the margins it enjoyed for a few years in the smartphone and tablet markets especially. For margins to increase, new products will need to become a major part of Apple’s business.

Of course, I wouldn’t say that these are foregone conclusions. Tim Cook has already confirmed that there would be many new products launched in the coming months (iRadio was the first announcement just a few weeks ago).

Declining margins are certainly a worry, but it’s far from a done deal. Also, declining margins in a market that is growing very strongly (and should continue doing so for some time to come).

If Apple is on pace to make $40 or so per share this year in what anyone would say is a down year and that we agree that Apple’s P/E is not going to get much lower, I think it’s reasonable to expect Apple to have a floor that is actually not too far from its current levels.

The Upside Remains Significant

Apple remains an incredibly strong franchise that could end up launching a big new product (such as a TV) in the coming months and that will continue to roll its existing products for some time to come. It’s also very reasonable to expect Apple’s P/E to come back up, which in itself would have a significant impact. I also think its way too early to give Android the victory over Apple. The fact is that there is a clear group of consumers that will continue the closed/simple ecosystem and lineup of products that Apple provides.

Apple also has an infrastructure of users that buy content through itunes, which, in many ways, is second only to Amazon in terms of merchandise search engines

asymco

credit Asymco

When I look at Apple, I see a stock with very limited downside, but fairly significant upside, exactly the type of trade that I look for.

Investing In Tesla ($TSLA)?

By: ispeculatornew | Date posted: 06.24.2013 (3:00 am)

teslaToday i was reading an article about Tesla and also heard from a friend who has done very well on his Tesla purchase. Then i watched this video which you can take a look at where the Tesla technology is displayed. There is no “next” Steve Jobs. He was unique in every way. However, if you believe that a big part of investing is finding strong leaders that will end up transforming entire industries and make their shareholders rich at the same time, then it seems very reasonable to ask if Elon Musk is the next leader of this century.

TSLA

There Is One Problem

I usually invest based on fundamentals. Here are some of Tesla’s numbers:

Market Cap: $11.5B
P/E: N/A (company has been losing money every quarter)

But..revenues are increasing rapidly:

tsla-fin

I find it hard to invest based on those numbers because what i’d be buying is this guy’s vision, the idea that he will end up building something beyond what we’d expect. In a way, this as speculative as it gets. I always look at the upside which is incredible here. The problem of course is that projects like the ones he is taking on usually fail so it’s fair to think that Tesla could simply be the next company that fails to transform the automobile market.

Do any of you own Tesla? Would you consider doing so?

Weekend Readings – Congrats to the Miami Heat

By: ispeculatornew | Date posted: 06.21.2013 (3:00 am)

lebronI’m not a huge NBA fan but I’ve gotta say that it was an amazing final and what a comeback by the Heat, did any of you end up watching it? Congrats to Lebron and the others on another remarkable season!!

General Readings

How the Robots Lost: High-Frequency Trading’s Rise and Fall @ BusinessWeek
Investment options are not comforting @ CuriousCat

Dividend/Passive Income Readings

Dividend investing will always beat the entire market @ TheDividendGuyBlog
Dividend income is more stable than capital gains @ DividendGrowthInvestor
Best of luck to Dividend Ninja @ Dividend Ninja

Tech Stock Readings

Google (GOOG) internet balloons @ Wired
Will Zynga (ZNGA) shareholders be compensated for their patience? @ SeekingAlpha
The Genius of Uber @ Pragmatist

TripAdvisor (TRIP) Has Much Higher To Go

By: ispeculatornew | Date posted: 06.20.2013 (3:00 am)

Tripadvisor-LogoTripadvisor was spun off from Expedia over a year ago and from the start I was very excited. I did get burned initially but I’m starting to consider it for my next long term speculative pick. It would be a bit outside of my ecosystem philosophy but I’m starting to believe that TripAdvisor will end up becoming the top travel website out there, surpassing giant Priceline (PCLN) and others.

TRIP’s Numbers

[table “522” not found /]

TRIP

We can also compare revenues and growth. I think it’s fair to say that TRIP has a lot of momentum. Of course, that should not be a big surprise. As a much smaller and newer player, it should be growing a lot faster. If it wasn’t, there would be an issue.

The One Big Factor

More critical to this analysis though is the fact that TripAdvisor is increasingly becoming the starting point for travelers trip planning. Just look at traffic to its websites and you can see what I mean. As they continue to build around a strong community, the website is becoming more useful in ways that competitors simply cannot challenge. The plan seemed to be to build a great product/community at first that would provide the community with a comprehensive number of reviews no matter what you were looking into. Then, they made it easier to see where our friends have been (as well as our extended friends) thanks to its Facebook connect link.

Now comes the best step from a shareholder perspective, TripAdvisor is making it easier for users to book their trip by providing them prices and other means.

Much More To Come

As TripAdvisor continues to create relationships with these millions of hotels, restaurants and other local businesses by helping them interact with users, give relevant information and more, they will also open the door to more possibilities such as helping users book (eventually), letting businesses advertise more easily, etc. The possibilities are significant and very difficult to compete with for competitors.

Does TripAdvisor look cheap at its current valuation? Not exactly. But I do think the potential for growth is very significant and am strongly considering getting in on the action.

I’d love to hear from you.

Ultimate Sustainable Dividend Portfolio – June 2013 Update – Still Crushing the S&P500

By: ispeculatornew | Date posted: 06.19.2013 (3:00 am)

retirementIn 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. I would personally say that things have been going very well and will certainly continue to evolve. I do have a few more things planned which I will discuss in the near future.

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 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 “521” not found /]

Dividends Received

Things remain very good on this front as I will get nearly double the amount I received last june ($92 vs $52).  Take a look at the progress:

usdp2

Ultimate Sustainable Dividend Portfolio News

There isn’t much to report this time around. The only big news is the announcement by Dover that it will spin off some of its communications technology businesses which seems to have helped its business. I will be selling off that business when it happens to buy back Dover though… more on that later on.

Returns

Things continue to go very well and the USDP continued to outperform the S&P500 giving an extra cushion…! How did I manage? One stock that has done very well is DOV, just look at the chart below so far this year.

usdp

 

DOV

Trades

Not much to report. I ended up buying shares of every stock that paid out dividends and needed to use most of my $1000 monthly cash investment for that reason. Nothing else to report.

Passive Income Targets – June 2013

By: ispeculatornew | Date posted: 06.18.2013 (3:00 am)

retirementIt was a fairly slow month but I do feel like things are getting much clearer. Why? I’m convinced that I want to carefully start investing on margin and build my own mini-Berkshire empire. It’s been tricky to save as much in the past few weeks so I’ll be putting more focus on reducing my spending to set more aside.

The reason I post this monthly update is both to keep myself accountable but also have a more public discussion about my plans and how I can become financially independent as quickly as possible.

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.

My primary objective remains to generate 100K in passive income on an annual basis as soon as possible, ideally from a few different sources. My partner just wrote about how he hopes to retire at age 35 which you can check out.

June Updates

-I posted the latest USDP update, with another one coming later this week
Time to start investing on margin?
How to build your own mini-Berkshire empire

How Much Do I Really Need?

I am aiming for an income of 100K or so, before taxes as a first goal. 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?:)

pi4

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:

5.46% – Dividend/Investing Portfolio: I am currently generating a dividend yield of about 3.43%. This portfolio will be increasing over time. 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.

7.48% – Private Investment In My Online Company: I have discussed how my web company has been the best investment of my life so far. I’m happy to say that I was able to slightly increase my monthly income from the company even though it wasn’t expected. I certainly hope that will keep happening.

Total: 12.94%

It’s not spectacular by any means yet. That being said, I am 32 years old 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%:)

pi2

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 as well as the question of becoming (or not) a landlord.

0% – P2P Lending – I started exploring the idea and wrote my first post about it here🙂

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

0% – Farming – I know it sounds crazy but I’ve started looking into it as you can see from my post a couple of weeks ago

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.

My Long Term Passive Income Objectives

January 2014: $12,000/year
January 2018: $25,000/year
January 2023: $50,000/year
January 2030: $100,000/year

I love seeing that little blue line above the red one, it’s a very nice thing to see:) The trend isn’t as convincing but I do expect that my trend will be flat and then have some nice bumps as I start building new trends!

pi3

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!

 

New Trade: Long TripAdvisor ($TRIP) & Short OpenTable ($OPEN)

By: ispeculatornew | Date posted: 06.17.2013 (3:00 am)

This morning I sent out a newsletter to the members of my tech stock focused mailing list about companies that are playing the long game (it’s one of the key things I look for when making speculative longer term investments). I spent a lot of time thinking about it this weekend and today’s post fits very well. If you’d like to get 1-2 emails per month with additional thoughts on the tech stocks that I follow, be sure to join the mailing list here:

Today’s new trade is one that I probably would never have considered until very recently. OpenTable is the type of stock that is incredibly scary to short but it does seem to have lost some of its momentum and feels like a good play at its current levels. Before going further here are the numbers on these two companies:

[table “520” not found /]

And the quarterly Y/y revenues growth:

TRIP Revenue Quarterly YoY Growth Chart

TRIP Revenue Quarterly YoY Growth data by YCharts

Long TripAdvisor (TRIP)

TripAdvisor was not at the top of my top social web stocks earlier this year but I’ve always held it in high regards.  The company is quite possibly the best positioned travel website out there which is saying something when you consider rivals such as Priceline (PCLN), Travelzoo (TZOO) and others. When I look at the numbers above, I see two comparable stocks but TRIP just seems more attractive no matter what metric you’re focusing on.

TRIP

Next earnings release: July 24

Short OpenTable (OPEN)

OpenTable is a stock I’ve been very hesitant to trade. I do know the product very well and like many of you I’m sure, am a regular user. It’s a great product and I do think the company will do well over time. That being said, I don’t see anything that would justify its current P/E ratio that is almost identical to TripAdvisor. The company will struggle to keep up strong double digit growth and I do think it’s a stock that has significant downside at its current level.

OPEN

Next earnings release: August 2nd

Disclaimer: No position on either TripAdvisor (TRIP) or OpenTable (OPEN)