Archive for January, 2014

Gambling On Tennis.. Not As Crazy As You’d Think

By: ispeculatornew | Date posted: 01.29.2014 (3:00 am)
wawI’ve discussed the concept of sports betting as a viable investment strategy (that provides great diversification) in the past and would certainly love to give it a serious shot at some point. Last week I read a very interesting piece on Bloomberg about one of the guys trading such strategies:
One interesting aspect about this article is the fact that he seems to be using a strategy that would compare with the way several HFT’s trade stocks and other financial instruments. He basically does not care or even know what he’s betting on (in this case, tennis players). For funds such as these, it’s never about “liking” a specific player or name, it’s all about patterns, history, etc. He then heads to platforms such as London-based Betfair to wager that money on behalf of investors in his fund.

It’s Something I’d Love To Try

To be honest, a few years ago I did try starting a small fund that would bet on tennis matches. The problem like any other market is that it’s extremely difficult to do well while spending only a couple of hours per week when you’re competing against funds and analysts that do it full time. I’d be very curious though in finding out how well I could do if I was doing this full time. I’d probably have to start a website where I’d discuss my wagers, etc:) I’ll certainly keep all of you posted if I end up doing that. I guess I’ll add to the list of jobs that I’d love to give a try at some point.

Being paid to watch and be interested in sports? What could be better:)

Weekend Readings – Will Your Next Car Purchase Depend On Your Phone?

By: ispeculatornew | Date posted: 01.24.2014 (3:00 am)

I read a very interesting piece about the coming battle in “smart cars”. Seems like all the big car makers are signing exclusive deals with either Apple (BMW, Mercedes, GM, Honda) or Google (Audi, to power the next generations of cars. Will that influence your next car purchase? As crazy as it sounds for some of you, it would for me. My phone is such a big part of my life (in terms of information, multimedia, etc) that having a good integration with that next car would certainly help.

General Readings

How Washington beat Wall Street @ Politico
How the Target fraud happened @ KrebsonSecurity

Tech Stock Readings

Apple widens gap with Samsung in the US @ TechCrunch
Blackberry- the shorts have it wrong @ CitronResearch

Passive Income Update – January 2014

By: ispeculatornew | Date posted: 01.23.2014 (3:00 am)

retire_22The start of a new year is always a great time to think about the longer term stuff and while I know my retirement is several decades away, I’m hoping to become financially independent much earlier than that. It’s also encouraging to reach a new year as I get my once-a-year performance bonus in December which always gives a boost to these accounts.

Do you have long term financial objectives? Are you tracking those on a monthly or yearly basis?

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.

With both sides of the US government acting like complete fools these days, more than ever I feel like being financially independent is critical, don’t you? So here is how I went about this whole process:

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.

January Updates

-The latest update of the USDP was published last week
-I did end up getting a good bonus at year-end which mostly went towards my investing portfolio so there is a nice increase in the passive income of that portfolio.

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. I discussed the idea of needing 100K in yearly income here.

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?

pas1

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:

7.39% – Dividend/Investing Portfolio: I am currently generating a dividend yield of about 3.30%. 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: 14.87%

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%:)

pas2

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. I’ve also looked into the possibility of renting property that I’d own though AirBnB (and an updated post here) and a few other questions I had been wondering about.

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

pas3

Ahhh! So that big jump in passive income doesn’t quite seem as impressive on this chart. I guess that is to be expected as it is such a long term project that the one key is long term consistency rather than having a step back or a big jump. I’ll keep working at it:)

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!

 

Should Dividend Investing Be Considered Active Investing?

By: ispeculatornew | Date posted: 01.22.2014 (3:00 am)

dvdI don’t know if it’s just me, but when I hear all about the debate between active and passive investing, I usually hear about the fact that the vast majority of investors end up falling short of beating the overall market. That mostly concerns investors that are either stock picking or paying someone (fund manager) to do so for them. The fact is that the vast majority of them lose. None of this is news I’m certain.

Then, those investors will go in one of 2 directions:

-Build a coach potato/index based strategy that relies on low cost funds (ETF’s generally)
-Build a dividend portfolio that is highly diversified (such as the USDP that I’ve built)

I certainly believe in both strategies and they are the core of my retirement savings. I also do some stock picking (long & short trades, long term speculative picks, etc) but most of my savings are in the safer, less volatile dividend & index strategies.

If You Don’t Believe In Active Investing, Dividend Investing Is Not For You

I’ve gotten into a few arguments about this over the years. Dividend investing IS active investing. Unless you’re following some kind of index, you are making decisions about which stocks to hold, which ones to ignore, etc. That is exactly what you’d call active investing.

“But Dividend Investing Has Done Incredibly Well Over The Years”

Yes, that is absolutely true. Dividend stocks generally perform well and will outperform the overall market in certain conditions which can last for a few years and sometimes much longer. That does not make it less active.

I’m Not Saying It’s Wrong

As I said, I’m a believer in this type of investing and I do think that in general dividend investors do have more rules around their trading & investing which helps out a great deal, especially over longer periods of time.

Do You Consider Dividend Investing To Be Actively Managed Investing?

New Trade: Long Priceline ($PCLN) & Short AOL ($AOL)

By: ispeculatornew | Date posted: 01.20.2014 (3:00 am)

After receiving a lot of feedback when I went public with my view of Yahoo, I did short it last Monday which ended up being good timing as the COO was fired later that week which set the stock back a bit. Overall the performance has been good but it’s still very early obviously…!

As will be the case all year, my long & short stock picks will be available to see in my live spreadsheet:

http://www.intelligentspeculator.net/livetrades

Today, as was the case last week, I’m trading two tech stocks that are both part of the “original internet stocks era”.

You can see the numbers for both companies here:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
AOLAOL Inc50.7731.922.1212.7-0.473.9528.660.6324.06N/AN/A
PCLNpriceline.com Inc1178.0433.7723.241.9120.794.67125.991.26105.5632.5476.16

As is the case for most of my trades, I see a major discrepancy here between the P/E and the growth that both of these stocks are able to generate. I think we’ll agree that the growth story is very different here.

AOL Revenue (Quarterly YoY Growth) Chart

AOL Revenue (Quarterly YoY Growth) data by YCharts

pclnLong Priceline (PCLN)

Ahh Priceline has been an incredible value for over a decade now. It’s been a strong brand and company that has been able to impress year after year. You’d think that such a streak would eventually come to an end and it will but I’m personally expecting to keep up for some time as the online travel industry continues to grow. It is trading at a reasonable P/E given its recent growth and I personally think the risk of a bad surprise is very small with PCLN which is a big benefit.

PCLN

Next earnings release: February 7th 2014

aolShort AOL (AOL)

Ahh AOL is one if not the stock that I’ve struggled the most trading since running this blog. After selling some assets and making some solid acquisitions, the stock has performed very well, especially when you compare the actual financial results. I’m betting that won’t keep up. Tim Armstrong has done a good job but some of those acquisitions are not working out as well as you’d expect and the much hyped “local” strategy that revolved around “Patch” looks like it’s being declared a failure.

AOL

Next earnings release: February 26th 2014

Disclaimer: No positions on Priceline (PCLN) or AOL (AOL) but I will initiate the trade on the open today

Weekend Readings

By: ispeculatornew | Date posted: 01.17.2014 (3:00 am)

nflxNet neutrality is quickly becoming a major debate in the US and with good reason. It could significantly impact the internet landscape and investors took notice this week when Netflix declined because of a recent judgment. Hopefully that ends up being reversed, or as Fred Wilson put it, future companies could have a tough time getting started.

General Readings

What you know about retirement is wrong @ WSJ
Tesla (TSLA) surges @ TechCrunch

Dividend & Passive Income Readings

Compilation of dividend stock picks per sector for 2014 @ TheDividendGuyBlog

Tech Stock Readings

Google (GOOG) the conglomerate @ MobileOpportunity
Google’s (GOOG) new business model @ GOOG
3 things people get wrong about Apple in China @ Fortune
Better time for the music industry @ TheBigPicture

Ultimate Sustainable Dividend Portfolio – January 2014 Update

By: ispeculatornew | Date posted: 01.15.2014 (3:00 am)

passiveincomeIn 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.

Things continue to go very well for the USDP which I’m thrilled to see. The months of December and January are always slow in terms of news but as long as things continue to go well, I can’t complain. 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:

TickerNameSharesJan 14 2014 PriceJan 14 2014 Values
OMCOmnicom Group Inc29$73.91$2,217.30
MSFTMicrosoft Corp71$35.78$2,576.16
JCIJohnson Controls Inc39$51.92$2,076.80
PEPPepsiCo Inc/NC27$82.37$2,306.36
ETNEaton Corp31$75.70$2,346.70
DOVDover Corp23$95.42$2,290.08
ITWIllinois Tool Works Inc27$82.23$2,302.44
XLNXXilinx Inc37$46.05$1,703.85
SJMJM Smucker Co/The19$99.34$1,887.46
BLKBlackRock Inc10$310.52$3,415.72
TROWT Rowe Price Group Inc28$83.19$2,412.51
OXYOccidental Petroleum Corp21$92.31$2,030.82
COPConocoPhillips25$68.32$1,708
XOMExxon Mobil Corp19$99.12$1,883.28
ADIAnalog Devices Inc43$49.71$2,187.24
HASHasbro Inc31$52.31$1,621.61
MATMattel Inc42$44.40$1,909.20
INTCIntel Corp53$26.51$1,405.03
AFLAflac28$64.70$1,876.30
BAXBaxter International23$69.66$1,671.84
IVZInvesco Ltd67$35.22$2,359.74
VWOVanguard FTSE Emerging Markets43$39.81$1,711.83
BNDVanguard Total Bond Market21$80.57$1,691.97
Cash$75.44
USDP$47,868.63
SPX13.80378067$3,300.53$47,593.77

Dividends Received

January is always a slow month in terms of dividends and this one is no exception but I did fare better than last year when the portfolio had generated $0…! haha! This time it generated $11… enough for a small McDonald’s meal right?:)  Take a look at the progress:

usdp2

Ultimate Sustainable Dividend Portfolio News

Not much to report on this front unfortunately as it remains a bit slow in this start of the year!

Returns

While the USDP remains ahead of the S&P500, I did give up some ground this month unfortunately…!

usdp1

Trades

A bit more happened this month as I actually bought a bit more of ETF’s exposure, buying 8 shares of BND (Vanguard Bonds) and VWO (Emerging Markets) which now represents about 7% of the portfolio.

Figuring Out Google ($GOOG)

By: ispeculatornew | Date posted: 01.15.2014 (3:00 am)

I wish this was a post where I could give you an exact answer, but it’s not. Increasingly, I’m struggling to get a strong opinion about Google’s (GOOG) stock. I do know that I LOVE what they’re doing. They have incredible products that I use all the time and are working on moonshots (self-driving cars, balloons, top ISP, etc) that could transform our way of living. I have no doubt that Google will be a major tech company for decades longer. I also think that from that perspective, the return of Larry Page as CEO was the best thing that could have happened.

There is a big difference between a great company and a fast rising stock price though.  In the end, for Google to be worth its current investment, the revenues and profits will need to increase significantly over the next few years. Let’s start off by looking at Google’s numbers:

TickerNamePriceEPSPE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
GOOGGoogle Inc1122.9832.9731.8221.570.8532.374.42248.350.96153.3422.4118.89

So Google is trading at a forward P/E over 20. In the past 5 years, both sales and earnings per share have increased by around 20% annually which is solid. I’m not convinced that it will be able to keep it up though. If you think about it, Google’s money has been mostly generated by its search and display advertising businesses. Those have mostly seen growth because of increased traffic. With a dominating market share and most of the growth of the internet population behind us, I’d think that Google will need to generate growth from other divisions.

GOOG

 

Already, you’d think that through products such as Maps, Gmail, Docs, Drive, Android, its venture investments and other kind of activities, Google would be able to generate significant cash. That is not the case though.

What Is Google’s Global Strategy?

Google continues to say its mission is organizing the world’s information but if that’s the case, what is the logic behind investing $300M for a stake in Uber or paying $3.2B to take over Nest. Yes Google has brilliant minds and has been able to accomplish more than any other tech company in the last decade. But does that mean it should start spending its money, energy and focus over all kinds of bets all around the world? It can afford any of these bets… but they’re adding up and I’m not sure that as a shareholder, I’d end up getting the best possible deal.

In The End, I Do Trust Google….For Now

I guess at this point, it’s all about trusting Google for what it is and is attempting to do. I’d hate to bet against Google, especially over the long term which also explains why I ranked Google #6 in this year’s Power Rankings. I will continue to work on figuring out as best as I can how they’re doing. If ever you’re very interested in Google, I highly recommend a recent podcast from Asymco that attempts to better understand Google, it is extremely well done.

What Are Your Thoughts On Google? Do You Feel Confident About Your View?

New Trade: Long eBay ($EBAY) & Short Yahoo ($YHOO)

By: ispeculatornew | Date posted: 01.13.2014 (3:00 am)

Last week I was able to open my first long & short trade of the 2014 season where I traded two extremes from my recently published power rankings. Today is not as extreme from that perspective but I do feel like it makes for a great trade in terms of risk vs reward.

As will be the case all year, my long & short stock picks will be available to see in my live spreadsheet:

http://www.intelligentspeculator.net/livetrades

Today I’m trading two tech stocks that are both part of the “original internet stocks era”.

You can see the numbers for both companies here:

TickerNamePriceEPSPE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
EBAYeBay Inc52.162.6925.316.6-5.0920.774.511.0610.8913.438.94
YHOOYahoo! Inc41.231.4535.4624.881.190.053.890.724.18-8.13259.97

When I see a company that is able to generate significantly more growth but continues to trade at a cheaper P/E, it screams opportunity…! In my most recent Power Rankings, these two companies ranked #10 and #25…you can imagine which one ranked where:)

YHOO Revenue (Quarterly YoY Growth) Chart

YHOO Revenue (Quarterly YoY Growth) data by YCharts

$ebayLong eBay (EBAY)

You can call me an eBay skeptic. I’m far from convinced that their overall direction with their main ebay.com business and the movement towards same-day shipping makes a lot of sense. I don’t quite see how eBay can successfully compete with Amazon so trying to do it seems like a bad strategy. That being said, as I’ve been saying for some time now, I continue to think that the biggest value in eBay remains Paypal which still to this day remains mostly uncontested.

EBAY

Next earnings release: January 22nd 2014

Short Yahoo (YHOO)

Ahhh, I certainly had my fair share of comments regarding my most recent article about Yahoo (YHOO) on SeekingAlpha. I’ll try to answer those as soon as possible but my basic opinion about Yahoo is that while I do believe in Marissa Mayer and in the company’s long term success, I think it will be a very long term project so the recent explosion in the stock price makes me believe that Yahoo will mostly be moving sideways this year. There will be more positive news, more good hires, more positive press. But the actual financials? I expect limited progress this year so the current P/E makes it overvalued.

YHOO

Next earnings release: January 28th 2014

Disclaimer: No positions on eBay (EBAY) or Yahoo (YHOO) but I will initiate the trade on the open today

Weekend Readings – Time For Some Football!!!

By: ispeculatornew | Date posted: 01.10.2014 (3:00 am)

playoffsFootball fans… there is no doubt that this is THE BEST FOOTBALL WEEKEND. I simply cannot wait.. my picks (or in some cases what I’m hoping for).. are

Seahawks
Colts
49ers
Broncos

Should be a great one:) In the meantime, here are some good readings:

General Readings

My first investment @ AVC
Europe asking Edward Snowden to help out @ TechCrunch
How to invest as interest rates rise @ WSJ
In 2013, I learned that… @ ReformedBroker

Dividend/Passive Income Readings

Does 2014 change anything in how I invest?  @ TheDividendGuyBlog

Tech Stock Readings

Apple making $10B/year with apps @ TechCrunch
How Netflix (NFLX) reingeneered Hollywood @ TheAtlantic
It’s not a church, just an Apple (AAPL) store @ ReCode
Android’s rise to platform dominance @ TechCrunch