Archive for December, 2013

A Year Of Long & Short Tech Stock Trades

By: ispeculatornew | Date posted: 12.23.2013 (3:00 am)

hawaiAs most of you know, I manage my investments with a bucket system and the most speculative part is where I trade technology stocks. It’s a lot more risky but also my favorite part. I love keeping up to date with these stocks, trying to figure out which ones will do well, etc. There are 2 main types of trades that I do with those stocks:

Longer term speculative stock picks: I rarely do these. When I see a stock with significantly more upside than downside, I’ll take a longer term position in that stock that is relatively big. To give you an idea, I’ve done 2 such trades in the past 2 years.

-2012: Purchased Facebook (FB)
-2013: Purchase Apple (AAPL)

I’m up 175% and 40% on the 2 picks and do expect to keep these positions for some time. I’m also hoping to find another good opportunity next year. More on that soon obviously:)

Long & Short tech stocks: This type of trading is a lot more speculative and more short term. I do post my trades here:

http://www.intelligentspeculator.net/livetrades

The year started off extremely well but I got burned on a couple of trades later on. Still, the average return of my 24 trades is 1.83% which comes up to a 6,5% return for the portfolio. It’s not amazing but not terrible either. I’ll be closing out the final 2 trades this morning on the open.

The biggest change I made was giving myself more room when a winning trade crossed the +20% threshold. That worked extremely well. Unfortunately, I lacked a bit of discipline in closing some losing trades which I’ll certainly try to correct in 2014.

I’m also very excited about starting to trade Twitter (TWTR) in 2014 as the IPO hype and extreme volatility seems to be calming down As you know, I’m not a big believer in the stock so I might try shorting it at some point in the next weeks/months.. it would be a high risk/high reward play and I’d close it quickly if the trade went against me. Shorting a name like Twitter is something I always do with extreme caution.

I’m also hoping for a few tech IPO’s such as Dropbox, Uber, etc. We’ll see if those end up happening next year.

How Was Your Trading In 2013?

I also had a good year with my more passive dividend and ETF trading, so overall it was a great year. How about yours?

image credit: MostlyLisa

Weekend Readings – Edward Snowden As Person Of The Year?

By: ispeculatornew | Date posted: 12.20.2013 (3:00 am)

Edward_Snowden-2Time released its “Person of the Year” and it generated some controversy that Snowden, the now famous NSA whistleblower did not win it. Then, curiously, Google took Snowden out of its most searched people list. Most would agree that what he did was not ok, criminal, etc. But he did open a debate that is critical and has had an incredible influence… I personally think he should be the person of the year. What about you?

General Readings

What is economic growth? @ JerryKhachoyan
China is jumping on bitcoins @ Xinhuanet
Upstairs trading draws more big investors @ WSJ
Who you should follow on StockTwits @ StockTwits
Bitcoin gets crushed @ TechCrunch
Why I don’t trade stocks and (probably) neither should you @ EdMarkovich

Dividend & Passive Income Readings

All you need to know about stock splits @ TheDividendGuyBlog

Tech Stocks Readings

Apple’s selling point @ BenEvans
Amazon (AMZN) working on a secret payments solution? @ TechCrunch

Not Sure If These Guys Are Crazy Or Brilliant ($TWTR)

By: ispeculatornew | Date posted: 12.19.2013 (3:00 am)

$TWTRI’ve written several posts about social media stocks and have been bullish about the main companies involved. That being said, I only hold stock of Facebook (FB) mostly because I’ve found the valuation of LinkedIn (LNKD) to be too high.

I also had significant concerns about Twitter (TWTR) when the stock turned public. As you can imagine, that sentiment is only stronger:

TWTR

I simply cannot see how Twitter will be able to generate enough to justify such a valuation. Even the consensus estimates have Twitter losing $0.21/share this year and $0.06/share in 2014.

While I see tremendous opportunities for companies such as LinkedIn and Facebook to see strong growth, I’m not as convinced that Twitter can also pull it off. Why? Less users, no obvious alternatives to advertising, etc.

Would I Short TWTR?

While I’d never buy TWTR at these prices, I can’t imagine shorting either. Twitter is not only an unbeleivable product but it’s a “trending” stock and i could easily imagine that run going much higher. Clearly, others don’t agree. Look at the number of shares being borrowed:

twtr-short

Are they smart? Crazy?

Ultimate Sustainable Dividend Portfolio – December 2013 Update

By: ispeculatornew | Date posted: 12.18.2013 (3:00 am)

investingIn 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.

This month turned out very well as the USDP outperformed the S&P500 significantly;)

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.

Things continue to go very well for the USDP which I’m thrilled to see. 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:

TickerNameSharesDec 17 2013 PriceDec 17 2013 Values
OMCOmnicom Group Inc29$69.84$2,025.36
MSFTMicrosoft Corp71$36.52$2,629.44
JCIJohnson Controls Inc39$51.32$2,052.80
PEPPepsiCo Inc/NC27$80.46$2,252.88
ETNEaton Corp31$73.45$2,276.95
DOVDover Corp23$91.21$2,189.04
ITWIllinois Tool Works Inc27$79.96$2,158.92
XLNXXilinx Inc37$44.27$1,637.81
SJMJM Smucker Co/The19$101.10$1,920.90
BLKBlackRock Inc10$302.63$3,328.93
TROWT Rowe Price Group Inc28$79.81$2,314.49
OXYOccidental Petroleum Corp21$90.21$1,984.62
COPConocoPhillips25$69.06$1,726.50
XOMExxon Mobil Corp19$96.75$1,838.25
ADIAnalog Devices Inc43$48.94$2,153.36
HASHasbro Inc31$51.53$1,597.43
MATMattel Inc42$44.70$1,922.10
INTCIntel Corp53$24.66$1,306.72
AFLAflac28$66.01$1,914.29
BAXBaxter International23$65.55$1,573.20
IVZInvesco Ltd67$34.47$2,309.49
VWOVanguard FTSE Emerging Markets28$40.27$1,127.56
BNDVanguard Total Bond Market13$80.61$1,128.54
Cash$559.12
USDP$45,928.69
SPX13.80378067$3,192.29$45,065.71

Dividends Received

November turned out very well as you can see as the portfolio generated $111, which is 40% more than the same month last year.  December is slightly lower, probably because 1-2 stocks moved their dividend away from Decembre. Take a look at the progress:

usdp201312

Ultimate Sustainable Dividend Portfolio News

Nothing to report in terms of increased dividend…I guess everyone is focused on other stuff with Christmas around the corner:)

Returns

It was certainly a good month for the USDP although the portfolio actually did return less than the S&P500 in a tough market. It’s not much of a concern but worth nothing.

usdp201312-2

Trades

Not much to report here. Because I reinvested all dividends and needed to add some cash to buy “complete” shares so there wasn’t much cash left at the end of the month actually:)

Buying In An Overvalued Real Estate Market?

By: ispeculatornew | Date posted: 12.17.2013 (3:00 am)

It’s not the first time that I hear about the Canadian housing market being overvalued. Deutsche Bank came up with a simple yet powerful way to determine if prices were overvalued or not. How?

They use 2 key metrics:

Home price/rent (vs historical average): In theory, the ratio between buying and renting price. Why? Because it does not make sense for prices to increase much more rapidly than rent, that has proven to be unsustainable.
Home price/income (vs historical average): If income is rising by X%, real estate prices should increase by more or less that % as well. If not, it would generally mean that the population is using more debt to afford the expense which is obviously not sustainable.

So the economists looked at metrics for the 2 by country and used the average between the 2. The result?

real

Canada which is very frequently in the discussions of the most overpriced real estate (with Australia) is on the very top of this list.

canada

That is more source of concern for me as I continue to look into buying real estate. Does this mean I should postpone my plans? It’s certainly tempting. I could even look into buying in a country where prices are too low. I doubt buying in Japan or Korea would make sense but seeing that US prices are below historical prices makes it tempting.

Would you still be willing to buy real estate in a market like Canada? Or you’d try to get into an undervalued market even though it would be more complex and costly to do?

I’d Love To Buy Into Uber

By: ispeculatornew | Date posted: 12.10.2013 (3:00 am)

uberAs many of you know, in some ways I’m a “wannabe” venture capitalist. I love the idea of trading earlier on, in a high risk, high reward environment. I was looking to buy Facebook long before it became public (ended up buying a few months after the IPO) and since then had been looking at other companies. Twitter remains a questionable one for me, even after its IPO. I do like companies such as Dropbox but it’ll be awfully difficult to compete in cloud-computing based services where Google (GOOG), Facebook (FB), Microsoft (MSFT) and Amazon (AMZN) are running massive operations with very little regard for margins. Where does that leave us?

Sharing Economy

The whole idea behind this new generation of companies is to make better use of existing resources through technology. Uber has quickly became one of my favorite plays and I’m extremely impressed that Google ended up buying a 20% stake. What is Uber? It is basically a “lead generation” company that connects drivers/taxis to users. They make the whole experience (from pick-up, service, payment, invoicing, etc) extremely easy for all parties involved. They take a 15-20%  stake in those revenues and give the rest to drivers. It feels like a win-win-win. Uber has a great business on its hands if you think about it.

-Almost no capital required (they do not own cars, etc)
-They make life easier for all parties
-They’re able to fight the battles with taxi unions, etc

A few days ago, financials were leaked that indicated gross revenues over $1B this year making Uber’s take at over $200M.  As Google boughts its stake at a $2.5B valuation, that certainly seems like a great pricing point. I would imagine that over time, Uber’s margins will be very high. It is expensive to enter new markets as getting their name out there requires promos, etc. But once a market is running well, I’d imagine the margins would be very high. 50%? It’s certainly possible. The staff required to run these operations is fairly small and the potential here is significant. Just this year, Uber announced it was offering to deliver Chrismast trees in some markets. A lot more services could be added over time.

Have you ever tried Uber? Would you invest in such a company? 

Weekend Readings – R.I.P Nelson Mandela

By: ispeculatornew | Date posted: 12.06.2013 (3:00 am)

mandelaThe world was a made a far better place thanks to Nelson Mandela. I was fortunate enough to visit his museum on my visit to South Africa a few years and it’s incredible to imagine the impact that he had not only in his home country and in Africa but all around the world.

You can read more about it @ WashingtonPost

Have a great weekend:)

mandela-quote

Rackspace (RAX), One Of The Worst Investments Out There

By: ispeculatornew | Date posted: 12.04.2013 (3:00 am)

I’ve been burned by doubting Rackspace (RAX) in the past. Turns out that the stock has been incredibly resilient. I spent a considerable amount of time trying to figure out what was causing the rise and if it was sustainable. I’ll go into deeper details but as you can deduct from my title, I do not think it is sustainable and expect RAX to underperform significantly over the next 2-3 years. So invest in shares of RAX at your own risk….

Cloud Computing Is A Fast Growing Business

There is no doubt that cloud computing is a safe bet to grow very quickly over the next 5-10 years. Despite some issues such as the recent NSA findings, most corporations and individuals are relying increasingly on cloud based data. Businesses like Netflix (NFLX), Google (GOOG) but even more traditional industries are quickly moving their data and processes to the clouds.

TickerNamePriceEPSPE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaEarningsMkt CapRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
RAXRackspace Hosting Inc38.210.7857.0350.88-48.5527.723.637.071.022/12/20145.34B9.6823.126
ycharts_chart   ycharts_chart (1)

Cloud Margins = 0?

Rackspace’s valuations seems to be mostly based on its expected growth as it continues to grow in an exploding industry. The big issue though is that the margins in cloud-based services are quickly moving towards 0. Rackspace is competing with players such as Amazon (AMZN), Microsoft (MSFT) and Google (GOOG) which is a significant problem. Why? Because both players do not expect to make significant profits in that segment of their business. They view it as a way to get users in their ecosystems.  Think of how Google offers its “Google docs” for free. Or how Amazon has been able to dominate thanks to its AWS services. Those players are able to optimize so much that it becomes very difficult for RAX to compete. How? Building data centers around the world including in areas where cooling costs are smaller, working on data centers that are as efficient as possible, etc.

Google, Amazon, Facebook and Co. Do Not Offer Hosting Services

While it’s true that in many ways, those companies do not try to compete with RackSpace in offering the same services, they do offer interfaces (especially Amazon) that make it increasingly easy for independent companies to build applications and services that are built on top of AWS for example.  I only see that trend becoming stronger over time which will make it very difficult for RAX to grow those profits consistently.

Disclaimer: No positions on RAX

Top 100 Dividend Stocks – December 2013 Edition

By: ispeculatornew | Date posted: 12.02.2013 (3:00 am)

portDividend investing is a huge part of my investment strategy. As I’ve mentioned in my now monthly passive income updates, receiving dividend income from my both my Ultimate Sustainable Dividend portfolio and my ETF portfolio is a primary driver of how my retirement will be like a few decades from now:) Today, I went back to looking for the top dividend stocks from the S&P500!

Find Out More

No surprise in seeing Windstream (WIN) at the top of the list with a yield over 12%. As I always say though, this list is only a starting point. I think you’ll agree with me that paying over 3 times the money it’s making (look at the payout ratio) is not sustainable.  In fact, the top 5 companies are paying out more than they can afford!! DO is the top one that doesn’t but when I looked at a few names in our free newsletter, DO looked weaker than HCP. If ever you’d like to get free analysis, please subscribe to our newsletter here:

In the meantime, here is the list!

SymbolNameSectorMarket CapDVD YieldP/EPayoutEPS BasicRevDVD Growth
AAPLAppleTechnology567$B2.03410.8621.8333.6229.08N/A
BAXBaxter InternationalHealthcare22.2$B2.136923.0994.01-5.94-4.941.48
BLKBlackRockFinancial Services56.4$B2.599717.1744.1313.415.7716.87
DISWalt DisneyConsumer Cyclical159.8$B1.398818.27#N/A19.276.6338.91
GNTXGentexConsumer Cyclical4.5$B2.144714.4530.4617.1213.598.77
UNPUnion PacificIndustrials68.8$B2.707414.8149.1214.75.1627.42
HASHasbroConsumer Cyclical9.7$B2.359621.8649.975.432.1313.76
HPHelmerich & PayneEnergy6.8$B4.338229.44126.7521.6911.0467.27
INTCIntelTechnology150$B3.085613.5739.8934.888.79
JNJJohnson & JohnsonHealthcare297.2$B2.785319.6353.042.772.626.93
LMTLockheed MartinIndustrials66.3$B2.902618.9453.597.970.218.43
DISWalt DisneyConsumer Cyclical159.8$B1.398818.27#N/A19.276.6338.91
MCDMcDonald'sConsumer Cyclical109.6$B2.86325.2771.320.941.098.77
MSFTMicrosoftTechnology419.7$B2.52537.8190.91-6.768.4118.40
PEPPepsiCoConsumer Defensive146.4$B2.773727.5674.1-1.261.747.89
CVXChevronEnergy178.1$B4.525338.68177.02-23.71-7.548.55
STXSeagate TechnologyTechnology10.7$B6.469418.4111.3210.873.8127.83
TUTELUSCommunication Services18.5$B4.230117.1471.422.480.66.35
VZVerizon CommunicationsCommunication Services214$B4.245212.0247.7537.174.312.99
WMTWal-Mart StoresConsumer Defensive215.1$B2.932914.747.730.442.7110.13

image credit: MostlyLisa

Weekend Readings – Dropbox valuation?

By: ispeculatornew | Date posted: 12.01.2013 (3:00 am)

BZ_GXADCMAAez6_I hope I’m finding many of you well rested after a well deserved Thanksgiving break!! I’m enjoying a few more hours of Football before the final stretch towards Christmas gets started, I can’t wait:) Here are a few good readings!

General Readings

Wireless carriers are evil @ TechCrunch
Peter Lynch used to make money, now he gives it away @ NYT
Short selling lesson from SAC @ ReformedBroker

Dividend/Passive Income Readings

The only way to find a stock’s intrinsic value @ TheDividendGuyBlog

Tech Stock Readings

Dropbox’s valuation is pretty steep @ TechCrunch
The social/communications map @ Stretchery
The Fall and rise of Yahoo @ GigaOm